What Happens to a Deceased Person’s Bank Account?

Depending on the type of bank account the deceased owned, and if they died intestate, will determine how funds are allocated upon the owner’s passing. In this post, we lay out some easy-to-follow guidelines if you’re an Estate Administrator deliberating on how to deal with the deceased’s account(s). Let’s dive in.

Depending on the type of account owned, and if the owner had any designated beneficiaries in place, will determine how the account is dealt with.

The two most common account types are Joint Ownership and Sole Ownership. Another important point to be aware of is whether the deceased had designated beneficiaries as well. We will look at each of these topics in turn.

Joint Ownership

A bank account with one or more other people is the easiest kind of account to deal with upon the owner’s passing, as joint accounts have policies in place that are independent of the will or intestate laws of your state (with some exceptions).

Upon the passing of one of the owners of the account, the surviving owner will receive the account regardless of whether a will was in place. This also applies if the person in question is not your spouse, because of the “Right of Survivorship,” which states that if the owner passes, the remaining co-owner receives the funds.

Sole Ownership

In a situation where the deceased is the sole owner of the account, things are not so clear-cut. If the previous owner has a designated beneficiary(specifically a Paid-On-Death (POD) Beneficiary) in place, then the account will transfer to the beneficiary. This type of account transfer is very similar to accounts that have joint owners.

It is important to note that if the deceased did not have a will in place, then things are harder to navigate. So long as the designated beneficiary is a POD, then the asset will transfer as per usual. Yet, if there is no designated beneficiary then the account will likely have to go through the probate process to be accessed. We will take a closer look at the conditions that or show the account will have to go through probate later on in this article.

What happens to an individually owned bank account with no beneficiary designations?

If the bank account in question was solely owned by the deceased but has no beneficiaries listed, then the account will likely have to go through probate. If the deceased has a will in place, then the assets will be distributed according to their wishes–once the probate process has been completed and all of the creditors have been paid off.

If the owner died intestate, then the account will fall under their jurisdiction’s intestacy laws to indicate who will receive his or her property and assets. Usually, this means the account would end up going to the decedent’s spouse and children first. In cases where the deceased was unmarried and without children, then the asset would usually transfer to the next of kin.

When Does a Bank Account Have to Go Through Probate?

Although we have already noted some specific instances where probate will be required for a deceased’s bank account, it is worth running through those points again.

In the case of an account solely owned with no paid-on-death beneficiaries listed, the account will unfortunately have to go through probate. Any of the other account types we listed, joint ownership or sole ownership with PODs, will not have to go through the probate process.

While it may be discouraging to be in a probate situation, there is some hope. Depending on the state you are living in, if the total amount of the deceased’s assets is small enough, then the estate may be considered a “small estate.” If this happens, then you will have access to more cost-effective options when trying to receive funds as well as having access to a much simpler probate process.

To Recap

If you are the estate administrator dealing with the deceased's bank account, there are two situations where probate will not be required:

1. If the account was jointly owned between the deceased and another person.
2. if the account was solely owned but has paid-on-death beneficiaries listed.

In both of those cases, the account will transfer to the appropriate individuals regardless if there is a will in place.

In the case of a solely owned account with no beneficiaries listed, then the account will have to go through the probate process. But, depending on the size of the assets, you may be able to qualify for a small estate and get access to cheaper–and less complex–probate alternatives.

Need Help Administering An Estate?

If you are in a confusing position with bank accounts as an estate administrator, we can help. Our expert team of estate professionals will be able to determine what your best steps are going forward. Interested? Jump over to our contact page and send us a message. We look forward to hearing from you.