What Happens to Bank Accounts When Someone Dies?

By Beverly Bird - Updated January 29, 2018
Man hands holding debit card and using phone

When a loved one dies leaving a bank account, surviving kin might or might not have a legal right to the money, at least immediately. In many cases, the account becomes the property of the deceased’s estate, which means that it’s subject to probate. But there are a couple of exceptions to this rule.

Warning

Bank accounts often end up as part of the deceased's probate estate so only the estate's executor would be able to access them – but there are some exceptions.

The Probate Process

Probate ensures that the deceased’s debts are paid from his estate before the balance of his property is transferred to his beneficiaries. To make this possible, one of the first things the executor of the estate must do is open a new bank account in the name of the estate. The account will hold any money that comes in after the deceased’s death, such as his final paycheck.

The executor typically closes any bank accounts the deceased held in his sole name and transfers the funds into this estate account. She might need court approval to do so, and she should notify survivors and tell them not to take any money from the accounts if they have access to a checkbook or a debit card. But this rule usually applies only to accounts the deceased held in his name alone.

Special Rules for Small Estates

Smaller estates can avoid a full blown, complicated probate process in many states. Depending on the value of the property the deceased owned, the estate might be eligible for a simplified probate procedure. In this case, immediate family members might be able to take a court-approved affidavit to the bank to claim the money in the account. Speak with a local attorney to find out if your loved one’s estate is eligible for this kind of probate and what's involved with asking the court to approve such a transfer.

If family members don’t open probate proceedings of any kind, money held in the deceased’s bank accounts can potentially "escheat" to the state. This means the state can claim the funds, but usually only after a significant period of time has passed and no heirs have taken steps to open probate or otherwise claim the money.

Survivorship and Payable-on-Death Accounts

Some people set up their bank accounts with special provisions so the money won’t get tangled up in probate. They create joint accounts with rights of survivorship or with payable-on-death designations. Creating such an account is usually a simple matter of filling out some extra paperwork with the bank. With a payable-on-death designation, the money in the account goes directly to a named beneficiary when the primary account holder dies. The beneficiary has no access to the money until the death of the primary account holder.

Joint accounts, particularly those held by spouses, often transfer directly to the survivor, but this can vary by state law. In some states, this only happens if the account specifically carries a survivorship clause, stating that the money should go to the survivor if one owner dies. If such an account also names a payable-on-death beneficiary, the money doesn’t transfer to that person until the death of the second account holder.

In either case, the account would bypass the probate process.

Living Trusts

Estate planning offers several options that can help a bank account avoid probate. If the deceased formed a trust during his lifetime, he might have titled the account in the trust’s name. Because trusts don’t require probate, the account and its money would not be subject to court proceedings, but survivors still can’t legally access the money on their own. Such accounts are the property of the trust, so the funds would go to the beneficiaries named to receive the money in the trust documents.

About the Author

Beverly Bird has been writing professionally for over 30 years. She specializes in personal finance, divorce and family law, bankruptcy, and estate law, and she writes as the tax expert for The Balance. She is the author of more than 30 novels.

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