While death is certain, the fate of a decedent's bank account is not. While certain bank accounts are closed immediately upon death, others must remain open for months or even years as the estate awaits settlement in probate court. Co-ownership of a bank account also affects the timing of how long the account can stay open.
Typically, the belongings -- including funds in a bank account -- of a person who dies pass to beneficiaries through the probate process. The estate must be settled in a court proceeding before the account can be closed. However, the executor might have the ability to access funds in the account to pay last expenses, like funeral costs. This is accomplished by the executor filing with the probate court letters testamentary proving her legal authority to pay bills, file tax returns, manage assets, open accounts and close accounts.
The bank might require a certain protocol to be followed before an account can be closed. For example, you might have to file a copy of a death certificate with the bank. Some banks might require an original death certificate. A personal representative can close an account after she receives a tax identification number, but doing so can trigger early withdrawal penalties with some accounts. To remedy this problem, a personal representative can change the name of the bank account to her own name without actually closing the account.
If the spouse or another person had a joint account with the decedent, she may be able to keep using the account after death. However, some states only allow the surviving spouse to take a certain portion of funds from the account. For example, Connecticut allows a joint account owner to withdraw up to 75 percent of the funds, and the amount withdrawn can still be included as part of the decedent's estate for estate tax purposes. Re-titling the joint account into a single account may require proof of death.
State probate codes might allow small estates to skip the longer probate process. In order to qualify, the estate must be under a certain value stipulated by the law of the state. In these circumstances, a spouse or next of kin might have to sign an affidavit stating that the funeral expenses and other debts have been paid. Then, the judge will confirm that no other probate proceedings have commenced and authorize a specified individual to transfer personal property, including funds in the bank account.
If the decedent established a payable-on-death account, the money will transfer automatically. This type of account permits a person to use the funds in the account at his discretion during his lifetime, with the remaining balance to be transferred when he dies to his named beneficiary. Such accounts are not passed under a person's last will and testament and are, therefore, immune from probate court.
- Bankrate.com: 7 Tips for the Executor of an Estate
- The Koehler Firm: FAQ
- Town of Branford: Branford Probate Court FAQ
- Ohio State Bar Association: What You Should Know About P.O.D. Accounts
- Law Office of Eric Holk: What to Do When a Loved One Dies
- The Superior Court of California County of Santa Clara: Administering the Probate Estate (After Appointment)
- Summit County Court of Common Pleas - Probate Division: Probate Administration
- iMortuary: What to Do When Someone Dies: Bank Accounts
- Bankrate.com: When You Die, Is Your Bank Account in Limbo?
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