Knowing a little can help a lot
When a loved one passes away, it can feel overwhelming to be in charge of the practical implications of their death, while also working through the emotional impact of losing someone. Even businesses who provide important services may seem less organized to help with the affairs of someone who has passed away. For both of those reasons, it’s helpful to learn a little about what happens to bank accounts when someone dies and understand how you can be best prepared.
Important questions to consider are:
- Where does your loved one have account(s)?
- Who has access to the accounts?
- Is there a Last Will and Testament (“Will”) in place?
What accounts are open and where?
Having access to a complete electronic or physical list, or even a file of statements, can be helpful in determining where your loved ones’ accounts are maintained. While some people prefer to have all their accounts with one financial provider, others may have reasons for keeping accounts in different places. It’s easier to gather this information from your loved one well ahead of when you need to know. Finding out after the fact may require a lot of guesswork, in addition to proof that you are either the Executor or Personal Representative of the Estate.
Who can access the money in accounts?
This comes down to how the accounts were established and whether any joint account owners and/or beneficiaries have been added.
Joint Account Owners
Money in accounts that are set up as joint accounts—specifically Joint with Rights of Survivorship (JTWROS)—will automatically transfer to the surviving owner.
Tip for joint account owners: When the time is right, it’s important to remove the deceased person’s name from your account. Not doing so can cause delays to direct deposits along with tax reporting complications.
Any beneficiaries that were added to the account(s) as POD (payable on death) will automatically be recipients of the money in the accounts if there is no surviving joint owner. If there is more than one beneficiary listed on the account, the account owner would have specified (generally by percentage) how the money was to be divided between beneficiaries.
Tip for beneficiaries: If you know that you are named as a beneficiary on a loved one’s account, it is helpful to also find out if there are any other beneficiaries who have been named ahead of time. This can expedite the process when it comes time to close out the account.
If the account does not automatically transfer to somebody else via a joint owner with rights of survivorship or the existence of a POD beneficiary, it will likely be necessary to set up an estate account for your loved one. Through the process of probate administration, the claims of creditors may be paid from the Estate account before the remaining assets are distributed according to the instructions of a Will. If a person dies without a Will, State laws will generally dictate what happens to the money.
Good to know about Wills
Just like knowing where your loved one has financial accounts (and who can access those accounts), it’s equally important to know if they have a valid Will—and who can locate it. A Will governs the distribution of probate assets, wherever located. While joint owners or beneficiaries named on accounts would have access to the money in those accounts regardless of what the account owner’s Will says, the existence of a Will remains important for ensuring that other assets or affairs are taken care of as intended by your loved one.
This is a complicated matter, both emotionally and logistically, so we’ve created a simplified guide to bereavement to help walk you through some first steps to take. As always, we’re here to help. Reaching out to your local banker when you need guidance and support is always a great place to start.