When a person passes away, money is one of the immediate needs of their loved ones, for a variety of reasons. There are funeral expenses to handle, and there may be medical costs and other bills that need to be paid. For this reason, one of the most common questions that arises is whether the deceased individual’s funds can be released by the bank before their estate goes through the probate process.
Unfortunately, in most cases, the answer is no. If the individual’s bank account was in their own name and they didn’t designate a beneficiary as “payable-on-death (POD),” the process may take more time. The accounts will likely be required to go through probate court before their loved ones can have access to them. Legislation regarding this matter varies from state to state, however, and there may be measures the loved ones can take to simplify the process. Whenever there is a question on this issue, it is essential to speak with a knowledgeable probate attorney for advice. Consider the following situations that allow an individual access to a deceased loved one’s bank accounts.
Payable-on-Death Accounts
One of the easiest ways for a person to leave their bank account to another person is to name the individual as a payable-on-death beneficiary. This must be done while the account holder is still alive by submitting the proper documentation to the bank. Probate estate includes assets that must be approved by the court before being transferred to beneficiaries, and POD accounts are not part of probate estate. Once an individual with a POD account has passed away, the beneficiary can easily claim access to the funds by providing the bank with proper identification and the death certificate.
Accounts that Are Jointly Owned
If a decedent had a joint account with another individual, the surviving account holder typically becomes the sole owner of the account after the person’s death. This process doesn’t require approval from the probate court to complete.
Right of Survivorship Accounts
In the case of bank accounts that are held in two individuals’ names, there is typically a “right of survivorship,” which indicates that if one of the two passes away, the other individual will automatically own all of the money in the accounts. In some instances, it is very clear that an account provides this right. It is important to note, however, that the account may be a joint tenancy account. This happens if the bank’s account registration only lists the two individuals’ names and has no mention of the right of survivorship or joint tenancy. It is vital to check with the bank and make sure an account specifies the right of survivorship if that is the desired type of account.
Accounts That Are Held in Trust
If an individual has arranged a living trust in the interest of avoiding probate after their death, they may have specified that their bank accounts are held in the trust. In such a case, the individual they have named as the trustee will have access to the account after they pass away. They may then transfer the funds to the beneficiaries the individual has named in the trust document. This allows the accounts to avoid the probate process. To place bank accounts in a trust, a person must inform the bank and file any documents the bank requires while they are alive. The bank then makes the appropriate changes, and all account statements will be in the name of the trust, as opposed to the individual.
There Is Often Uncertainty After a Person Passes Away
When a married couple opens a joint bank account, it is typically clear that each one intends for the other to have access to the account if anything should happen to them. In many cases, however, one spouse may have a bank account solely in their name, or they may have added another person to their account as a co-owner. In these cases, the individual’s intentions on what they want to happen to the account upon their death may not be completely clear. For example, sometimes a person will add another individual to their account to allow for certain conveniences. Oftentimes, parents of grown children may add one of their children’s names to their account so the child can help them to write out checks for bills while they are traveling, busy, or feeling poorly.
Other scenarios may be different, however. For instance, a person may add a loved one to their account with the understanding that they will access the funds to cover funeral expenses when they pass away or for some other purpose entirely. Sometimes, the issue that may arise in such a case is when the other account holder legally becomes the outright owner of the account after the person passes away.
If there is no written document indicating the intended purpose of the funds, then there is no legal way to ensure the funds will be used as the person wanted. Once the other account holder becomes the sole owner of the account, they may use the money as they wish. This may create animosity among the decedent’s loved ones, as they may believe the money was meant to be dispersed in some other way. This is especially the case if the new account owner uses the money to pay for any of their own personal expenses.
When a person wants another individual to only have access to their funds for use on their behalf, there are several ways to accomplish that goal. To give the individual the authority to use the funds during the person’s lifetime, they may give them trusted power of attorney. If the goal is to leave funds specifically for the individual to use after the person passes away, they may create a small account with written instructions concerning its intended use after their death. It is imperative to avoid making an individual a co-owner of an account if the person does not wish for them to inherit the money with no strings attached.
Always Consult a Legal Professional with Probate Concerns
If you have bank accounts that you wish for a loved one to have immediate access to after you pass away and you want to be sure the funds are used according to your wishes, the skilled Orange County Probate team at The Flanigan Law Group can help. We have built a reputation for handling all probate and estate concerns with integrity and discretion. Visit our website to see how we can help you.