What happens to your bank account when you die?
What happens after we die? Science and religion have long debated this issue on a metaphysical level, while accountants and other financial professionals deal with the issue in an administrative and legal sense. They — perhaps along with estate attorneys, judges, and even debt collectors — step in to settle the consequences for your financial life. This includes managing your bank account and determining exactly where leftover funds go.
The details of what happens to your bank account when you die depend on how you left your financial affairs and what type of account you held.
“First, it’s important to note that what happens to your bank account when you die will depend on a multitude of factors,” said Mariah Street, CEO and managing attorney of Legacy Street Law. “In other words, what happens to one person’s bank account may not be the same thing that happens to another person’s bank account. There will never be a “this is exactly what will happen to each person’s account no matter what” process; however, the process for determining what happens to that account is still the same.
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Step 1: Determine who owns title to your account
“The first thing that will be looked at to determine what happens to your bank account when you die is who or what holds title to that account,” Street said. “Basically, we will have to see who owns the account name. You and your spouse had a joint account, which means that you are both co-owners? If so, that account will likely go directly to the surviving spouse. Did you have a trust in place that owns this account? If so, the funds in that account will be distributed according to the terms of the trust.
Step 2: Locate who is “payable on death”
“If you did not have a co-owner of the account at the time of your death or if a trust was not the owner of the account, the next question you will be asked is: did you have some kind of directive “payable to death” in place for this bank account?” said the street. upon your death. If you have elected to participate in this option, then this account will be assigned directly to the adult person or persons you have named.”
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Step 3: Money goes to probate (if needed)
“If the people you named as payable on death are minors, the funds in your account will be considered part of your estate and will need to go through your state’s probate process in order for the court to appoint the person who will manage and distribute that account on behalf of the child or children and decide how it’s distributed,” Street said. “It can be a lengthy process (they probably won’t see the money right away) and expensive, depending on age of the child or children upon your death, the complexity of your estate and family situation, and the nature of the probate process in your state.
Step 4: Was there a will?
If you owned the account yourself, did not have a trust in place, and there was no ‘payable on death’ directive on the account, we will next consider whether you had a will in place” , said Street mentioned. “If you did, the bank account will go to the beneficiary named in the will. It is important to note here that wills still have to go through the probate process I mentioned earlier, even if you have named an adult beneficiary for this account in your will or even if your will establishes a trust to your death for your minor children. Probate, in simple terms, is a state process that determines how the assets of your estate are distributed upon your death.
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Step 5: No Will, No Confidence? The state decides
“If… you didn’t have a will in place, state law will determine what happens to that account and who receives it,” Street said. “Who gets it and how will vary by state, because all state laws are different on this. And, again, your family or loved ones will have to go through the probate process to determine these things. Generally, the next of kin (as defined and determined by state law) will receive this account. »
A real estate lawyer may be needed
“As mentioned above, this process will be followed to determine what happens to your bank account when you die, but exactly what happens depends a lot on the factors above,” Street said. “Things can even happen that aren’t mentioned, especially if some sort of litigation or other complex legal issues are involved in the handling of your estate. It completely depends on the situation. Having a trusted real estate attorney helping your family through this administrative process is key to making things as easy and efficient as possible.
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