As you plan for what may happen to your assets after your death, a natural question is whether your heirs will be able to access your bank account, or what will happen to the bank account after death. While the money you have in the bank will not disappear after you are gone, there are some things you can do to make it easier or harder for your heirs to get the money and to use it in the way you would intend.
Planning Is Essential
When someone dies, their assets (known legally as their estate) pass on to someone else, but planning ahead of time is the only way to insure that they pass on to the person or people you want. You can name your heirs in a will, designating who you want to inherit your estate and how much or which parts of the estate you want each person to inherit.
If you don’t have a will, your estate, including your bank account, will pass to your closest living relative–your spouse or your children, in most cases. If you are comfortable with your spouse–or your kids if you don’t have a spouse–having the contents of your bank account and the rest of your estate, you don’t really need to have a will, but it still helps to have one and to do certain things to speed up the process of their having access to your funds.
Another thing that a will designates is who will be the executor of your estate. The executor has to file paperwork about your estate and make sure that your will is carried out, or that the closest relative(s) get your assets, in a process called probate.
If you have a surviving spouse that is a co-owner of your bank account, they will be able to use the funds after your death without restrictions or going through probate. But if you don’t have a living spouse, probate will have to be completed before heirs can get funds from the bank account unless you do one of two things: have a living trust set up or designate a payable-on-death (POD) beneficiary.
The process of probate allows the executor of your estate to pay any final bills or obligations from the funds of your estate, (including your bank account) before the remaining proceeds are distributed to your heirs. Executors can also be paid for their duties from the estate, but payment must be reasonable and not exorbitant.
A living trust has to be set up before someone’s death, but it will transfer the funds from your bank account to the trust’s account and whoever you designate will be able to get the funds under whatever conditions you set without probate.
You can also designate a POD beneficiary by signing paperwork at the bank, and this person will get the funds from your account upon your death without probate as well. By using a living trust or POD beneficiary, you will avoid making your heirs wait months or years without being able to access your bank account when they may need to do so to pay for funeral costs and other final expenses.
The Probate Process
When I lost my dad two years ago, I learned a lot about the probate process and found out firsthand what happens to someone’s bank account after they die. Because he was divorced from my mother and had not left a will, my sister and I, his only two children, became co-executrices of his estate, and we were also his heirs.
As co-executrices, we were able to get access to his bank account by presenting a death certificate to the bank along with identification and paperwork to show we were the executrices. Before we presented the death certificate, his employer deposited his final paycheck and vacation pay, and several automatic payments were processed, but once the bank was notified of his death, the account was frozen. A frozen bank account means no funds could be put in or taken out.
After the death certificate was presented, we had to then transfer the money that was in his account to an estate account so we could make sure all his bills were taken care of and deal with all the details of the estate before we liquidated the account and split it between us as his heirs.
The probate process took almost a year and although as executrices we had access to the funds from the account, we really couldn’t distribute them to ourselves until the funeral costs, final payments, and final tax returns were taken care of. We then distributed the funds and closed the estate account.
The Death of Your Bank Account
In a way, your bank account can die after your death if you haven’t planned well, but things will work themselves out eventually and your heirs will get the money after the delay of the probate process. If you want them to have faster access, you should plan accordingly to make sure that your wishes are followed and your heirs get what they should.
It’s also important to leave information about any bank accounts you have in a place where it will be found after your death. While there are ways to search for bank accounts and they are usually not hard to find, accounts can sometimes be missed and may end up never being claimed.