12/1/2022
Personal finances are an integral part of our lives, even in circumstances involving death. Knowing what happens when the holder of a bank account dies is important in order to be forewarned of this misfortune. In order to clarify this situation, we will discuss its basic points.
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What happens when a bank account holder dies
In principle, it will depend on whether the person who dies is the sole signatory, if the account is joint, if there is a trust or if there is a will involved. One of the biggest problems is that death can occur at any time and, understandably, many people do not consider the legal implications of this event.
If the owner dies and there is no beneficiary, the account is temporarily closed. In this case, the funds are frozen until the matter is resolved in a court of law. In the meantime, a judge can issue a document appointing an executor or administrator of the estate to allow the use of the money.
In the event that no will is left for the heirs, property and assets are bequeathed through intestate succession. The statutes of this legal figure depend on the state in which the deceased person resided and a judge establishes an administrator who distributes the assets.
Often, children may think they will have access to their parents' money in this scenario, but this is not the case. Because of the ownership structure, the children only have what is known as a power of attorney and not a joint account. The power of attorney ends when the account holder passes away.
What not to do
As a word of caution, family members or heirs who find themselves in this situation should not engage in any criminal action. What is least recommended is to try to withdraw money from an ATM, forge the deceased's signature or use mobile banking to pay bills.
This constitutes fraud and instead of solving the problem, it can only complicate it further.
What if it is a joint account
When it is a joint account and one of the signers dies, the person with whom the funds are shared has rights of survivorship. This means that you will need to take the death certificate to the bank to have the name of the person who has died removed from the account.
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It is also possible for the non-deceased person to continue writing checks, since legally there is no impediment due to the nature of this product.
The surviving account holder should be aware that the money may be subject to state estate or federal estate taxes. While the former vary, the latter apply to amounts over $11 million.
Some preventive recommendations
Although we are talking about how to proceed in the event of an account holder's death, it is ideal to take precautions to better handle this situation. Especially when you have a debilitating illness or are over 60, we suggest you consider these tips:
- It is a good idea to try to reduce the number of accounts to reduce the complexity of the paperwork. While this does not work for those who have set up a ladder scheme with CDs (certificates of deposit), it is preferable to unify savings or checking accounts in the same bank.
- It is always good to establish ownership of the accounts during your lifetime. If you have power of attorney over someone's funds, there are several things you can do. Consider moving the account to the owner's revocable trust, add one or more signers to the joint account, or designate one or more beneficiaries to the POD (payable on death).
- Since digital statements have become the norm for checking and savings instruments, we recommend having detailed records in the event of an impending death. This is so you know how many accounts exist and which banks they are in.
- If possible, have the funeral arranged in advance. The reason for this is that the heirs will need money during this difficult time. It is a way to prevent the stress of the situation and make it more bearable.
As we age or face situations that may mean death, leaving everything prepared is a conscious and responsible attitude in managing personal finances. As it is not possible to predict the future, we suggest you take care of your interests and those of your loved ones.
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