Bank Account Protocol After The Decease Of An Account Holder

When a loved one passes away, there are numerous tasks that need to be addressed. Informing the necessary individuals and arranging a funeral are just the beginning. It can be an emotionally taxing time for everyone involved. However, once the funeral proceedings have subsided, the real work begins, which includes organizing the deceased’s finances.

To ensure a smooth process, it is vital to designate a beneficiary who will receive the funds either as Payable-on-Death (POD) or Transfer-on-Death (TOD).

In straightforward cases, the funds are released, and the account is closed without any complications. However, if there is any uncertainty regarding the account ownership, the bank will freeze the account until a court decision is made to determine the rightful recipient of the funds.

In the absence of a will or beneficiary designation, the state assumes control over the deceased’s estate. The account then goes through probate court, and the funds are distributed according to the local inheritance laws in place.

Creditors are unable to claim funds from a joint account.

A secondary account holder has the authority to close the account, although they should be able to access the funds during the settlement process.

Note that while a joint account holder is covered by the Federal Deposit Insurance Corp. (FDIC) for up to $500,000, this coverage drops to $250,000 if the joint account is not resolved within six months. This change occurs because the account is considered individually owned.

A death certificate or other appropriate documentation will be necessary to gain control over the funds.

Bank statements for joint or single account holders should be retained for three years, but there is no obligation to keep them for longer than seven years.

If the deceased owned the account as tenants in common, their interest in the account can be bequeathed to someone other than the co-account holder.

In the absence of a joint account or a transfer-on-death account with a designated beneficiary, the account will go through the probate process. Without a will in place, the distribution of assets will be determined by the state’s intestacy laws.

To ensure the funds are passed on to children, it is necessary to make a per stirpes designation, indicating that a portion of the funds should be allocated to them. Failure to specify this designation will result in the entire amount going to the primary or contingent beneficiaries.

For instance, suppose the deceased has designated their brother and sister as beneficiaries in their will. If the sister has two children and she passes away before the deceased, then 100 percent of the funds will go to the brother. However, with a per stirpes designation, 50 percent will be allocated to the brother, and the remaining 50 percent will be divided among the sister’s children.

Consulting with an estate attorney is recommended to determine the appropriate course of action for managing your assets.