Bank Account Inheritance: What Happens To Your Cash at Death

When you die, the person designated as your beneficiary on your bank account will inherit any money left in that account. These designations transfer the assets outside of probate. If you don’t have a beneficiary named on your account, it will go through probate as part of your estate. 

Making an estate plan can provide peace of mind and provide for your family after you pass away. An estate planning attorney can make sure you have a comprehensive estate plan, including a will, trust, and beneficiary designations for your bank accounts. For legal advice about setting up an estate plan, talk to a local trust and estates attorney. 

Naming a Beneficiary on Your Bank Account

When you open a bank account, you generally choose someone as your beneficiary. You can make a payable-on-death (POD) or transfer-on-death (TOD) designation. When you pass away, the account’s assets will be transferred to the beneficiary outside of probate court.

Unfortunately, many people skip this step when setting up a new savings or checking account, or name someone as their beneficiary and fail to update the beneficiary when things change, such as their death or a divorce.

Estate planning involves planning for what happens to your estate upon your passing and updating your estate plan when major life events occur. 

A joint bank account is held and accessible by the other person named on the account. If you have a joint account (with rights of survivorship), the joint account holder can take withdrawals of all the account funds upon your death.

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What Happens to Your Bank Account?

Many people assume that the money in their bank account just goes to their heirs after they pass away. However, it is a long and complex journey for your bank account funds to reach your loved ones.

A family member can’t access a deceased person’s bank account unless the decedent named them as a beneficiary or provided for them in a will or trust. The surviving family members will generally need a certified copy of the death certificate for each bank account, certificate of deposit, or other account.

It may take months and cost your family members significant fees before it is transferred from your bank to your designated beneficiaries. The delays and costs of probate are avoidable through proper estate planning. 

Naming Beneficiaries on an Account vs. Going Through Probate

There are two paths your money and financial assets can take after you pass away. They can pass automatically through a trust or by naming your beneficiaries on an account. Alternatively, they can go through the probate process in the courts. 

If you include all your assets in a trust, they pass automatically upon your passing. A trust is also a private document and does not become part of the probate court’s public record. With a revocable living trust, you can continue to benefit from your trust assets (bank accounts and real estate) during your lifetime. It is only after you pass away that your property transfers, outside of probate, to your named beneficiaries. 

Another option is to ensure your sole bank accounts have named, up-to-date beneficiaries. This includes other financial assets, such as life insurance and retirement accounts. If you have named beneficiaries on your bank account, the account will be transferred to your beneficiaries upon your death without going through probate. 

Dying Without a Named Beneficiary or Last Will and Testament

If you do not have a trust or named beneficiaries on your bank account, your estate goes through probate. Probate is the legal process by which the court determines what happens to all your assets and property. If you do not name an executor, the court will appoint a personal representative to handle your estate. Your representative will gather your assets, pay your bills and taxes, and distribute your assets to your beneficiaries. 

Going through probate has downsides for your loved ones. The costs of the probate process can range from 3% to 8% of the estate’s value. This includes court costs and executor fees. Probate can also take months or longer. With comprehensive estate planning, your family can bypass probate entirely. Part of avoiding probate involves naming and regularly reviewing beneficiary designations on your savings accounts.

Without an estate plan, state intestacy laws determine how your property will be distributed. This may mean that your assets go to people you don’t want to have them, or that certain family members don’t get taken care of as you’d wish.

Making an estate plan, including beneficiary designations on your financial accounts, prevents your property from passing to the person the state law designates as your beneficiary. You can ensure your loved ones and those in need benefit after you pass away. An estate plan can also protect you when you become incapacitated and cannot make health care decisions or manage your financial affairs. 

Legal Advice With an Estate Planning Attorney

One of the benefits of an estate planning lawyer is that they can ask you the questions you have never considered. Trust and estates law attorneys have the experience to guide you through the estate planning process to cover all your bases.

For legal advice about planning for your bank accounts and other assets at death, talk to an estate planning lawyer.