Investopedia’s recent article, “What Happens to Your Bank Account After Death?” details the common ways you can set up your account to make things as simple as possible after your passing and what will happen if you don’t set up anything beforehand. In California, that means primarily avoiding the need to go into court for probate of a bank account.
The easiest way to pass your bank account on to your heirs after your passing is to make sure you name payable-on-death (POD) or transfer-on-death (TOD) beneficiaries on your accounts. This ensures that they won’t have to go through probate. When you name a payable-on-death beneficiary, they won’t have direct access to your money until you die. You can change the named payable-on-death beneficiary at any time.
A bank will frequently freeze an account upon notification of the holder's death to prevent fraud. Therefore, it's important to have a payable on death (POD) beneficiary designated to ensure that your loved ones can access your money if you pass away.
Adding account holders to your bank accounts can make things easier for your heirs after your passing. However, it can have downsides while you are living. Note that most joint account holders are considered joint tenants with rights of survivorship (JTWROS). That means the account passes to the survivor(s) when an account holder dies.
The other people on your account may also be subject to gift tax and can withdraw funds from the account whether or not you want them to. The assets in the account are legally considered theirs to qualify for government programs or if they have a creditor with a judgment against them.
If you don’t set up anything before your passing, your accounts will go to probate and be distributed according to state probate law. If your loved ones contact the financial institution, the bank simply will not provide them with any information. They will instruct them that they need "letters of administration" or "letters testamentary," which are both formal court orders made in California probate court to appoint someone as the executor or administrator of an estate.
Without a will, an executor will be appointed who will be responsible for paying off any creditors of the deceased. The remaining money will be distributed to the spouse and children of the decedent.
However, if the deceased has named a payable-on-death (POD) beneficiary for the account, they will get access to it immediately. They simply need to show the bank a death certificate and identification.
If you have a simple estate with no assets besides a bank account, adding a payable-on-death beneficiary to your account(s) is the easiest way to avoid probate. Probate of a bank account can be a long process, but it can be avoided with proper planning.
If you have a probate issue or an issue with a bank account, an experienced probate attorney in Los Angeles can help you navigate the process and figure out a game plan to handle the bank account.
If you have any probate questions, schedule a free appointment with us through our online appointment page. We would be happy to see how we can help.
You can also read reviews from some of the hundreds of clients we have helped over the years.
Reference: Investopedia (June 13, 2023) “What Happens to Your Bank Account After Death?”
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