What Happens to a Bank Account When Someone Dies?

When a loved one dies, there are emotional and logistical issues to deal with. You may have intense feelings about the loss, but at the same time, you may have to complete mundane tasks to handle the affairs of the deceased.

When it comes to financial matters, such as transferring a bank account to the heirs, the necessary steps depend on how the account was titled and any other estate planning that was put in place before death.

In this article, we cover what happens to a bank account when someone dies. We will review individual and joint accounts, as well as other types of account records.

And for those of you planning ahead, we've included tips on making things easier for your loved ones after you die.

What happens to a single bank account when someone dies?

A single bank account is owned by one individual, with no one else on the account. Also known as "individual" account records, these accounts typically take one of the following forms when the account owner dies:

If there is a POD beneficiary, the funds go to the person, person or entity named as the beneficiary. When this happens, the funds do not need to go through inventory.

If there is no beneficiary, the funds go to the estate of the deceased. Thereafter, the remaining funds will be distributed according to the instructions in the will. If there is no will, state law generally dictates who receives the funds.

Succession is the process of proving the validity of a will, paying claims against the estate, and distributing assets.

What about a joint account?

In most cases, assets in a joint account are automatically transferred to the surviving owners of the joint account when someone dies.

This is particularly true for joint tenants with surviving rights (JTWROS). But there are several ways to set up bank accounts with multiple account owners, so understanding how the account was created is critical.

What happens to a bank account when someone dies intestate?

There are many good reasons to get a will, but some assets can be transferred regardless of whether or not there is a will. When it comes to transferring bank accounts at the time of death, it may not matter if the person who died had a will.

Automatic transfers

In some cases, the funds are available to the heirs without the need to go through an estate.

With a POD registry, funds automatically go to designated beneficiaries.
With JTWROS accounts, surviving account owners assume the interests of the deceased person on the account.

Real estate

If an account is not automatically transferred to someone else through surviving rights or POD registration, the assets go to your property.

Thereafter, the funds are available to deal with creditor claims and the remaining assets can be distributed according to the instructions of a will. If there is no will, state law generally dictates what happens to the remaining assets.

What Happens To FDIC Insurance After Someone Dies?

When a bank account owner dies with assets insured by the Federal Deposit Insurance Corporation (FDIC), their FDIC coverage continues for six months after death.

Surviving spouses or anyone else involved can use this time to transfer funds to other accounts and ensure account balances are below FDIC insurance limits.

What if someone dies intestate but has a beneficiary on their bank account?

With a valid beneficiary, the funds in a bank account go to the beneficiary. This person will need to contact the bank and provide documentation to claim the funds.

If the beneficiary dies before the bank account holder, the assets usually go to the deceased's property. Thereafter, assets can be distributed according to instructions in a will or by state law.

How long do you have to claim the bank accounts of a deceased person?

There is no exact limit on when you should claim funds and it certainly can take some time to adjust to the death of a loved one. However, it is advisable to act promptly.

Over time, the account may become dormant and banks may be required to turn dormant accounts over to the state for safekeeping (usually after several years). The heirs will still have access to the funds, but there may be additional steps involved.

Additionally, the executor, personal representative, or trustee may need to close the decedent's bank accounts to complete the probate process.

Finally, when adequate FDIC insurance coverage is a concern, it's smart to transfer funds within six months of death.

 

We hope you enjoy watching this video about What Happens to a Bank Account When Someone Dies?

Source: Roland Waller

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