• After someone dies, the handling of bank accounts depends on the type of account, ownership structure, and whether there is a will or named beneficiaries.
  • Joint accounts with rights of survivorship and accounts with payable on death (POD) and transfer on death (TOD) designations bypass the probate process, transferring directly to named beneficiaries.
  • Other bank accounts may be subject to probate, where debts are settled, and then assets are distributed according to the deceased’s will or state laws.
  • Seeking legal advice and utilizing financial institutions’ estate services may be beneficial to help you efficiently manage the estate and properly fulfill legal obligations. 

Losing a loved one is never easy, managing their financial affairs can add an extra layer of stress during an already difficult time. Whether you're the executor of an estate, a beneficiary, or a loved one, it's common to wonder, “What happens to a bank account when someone dies?”

The answer depends on several factors, including the type of account, its ownership structure, whether the deceased left a will, or whether the account has named beneficiaries. If the deceased person has a will, it appoints an individual or organization, known as an executor, to manage the deceased’s estate. When there is no will, the courts appoint an administrator who serves a similar function but is guided by state laws rather than the deceased’s wishes. 

Understanding the legal processes and steps involved after an account holder's death can help ensure the assets are smoothly transferred to the rightful heirs.

Immediate Actions After an Account Holder’s Death

After receiving notification of an account holder’s death, a bank will take prompt steps to secure the assets. For an account owned by a single individual, this typically includes:

  • Account status review: The bank reviews the account to confirm its ownership status and determine whether it has a beneficiary designation. This critical step ensures that the next actions align with bank policies and legal requirements.
  • Request for documentation: The bank will request documentation such as a certified copy of the death certificate and legal documents indicating who has the authority to make decisions regarding the deceased assets.

The Role of the Executor or Administrator in Managing Bank Accounts

The executor or administrator must provide legal proof of their authority to the bank. Once approved, they are responsible for settling the deceased's debts, paying bills, and taking care of fees, taxes, and final expenses, such as funeral costs.[1] When all debts are paid, and remaining assets are ready for distribution, the executor or administrator must transfer the funds to the beneficiaries as outlined in the will or—if no will exists—according to state succession laws.

OD and POD Accounts

Some bank accounts have transferrable-on-death (TOD) or payable-on-death (POD) designations, which allow the account holder to name a beneficiary. In this case, once the bank receives the death certificate and other necessary paperwork, it releases the funds to the named person and typically closes the account. TOD and POD accounts bypass the probate process, streamlining asset distribution.[2]

Joint Accounts and Survivorship Clauses

Many joint bank accounts have rights of survivorship. When one account holder dies, the other becomes full owner and can continue using the account and its assets without disruption. If the joint account does not have rights of survivorship, the deceased’s share of the account may go through probate for distribution according to their will or state succession laws.[3]

The Legal Process of Distributing Bank Accounts After Death

Survivorship clauses and TOD or POD designations simplify the distribution process, but what happens to a bank account when someone dies without a beneficiary? 

In this case, the assets go through the probate process, which may typically involve the following steps:[4]

  • Initiating probate: The executor or another interested party files a Petition for Probate of Will and other state-required documents to initiate the probate process.
  • Appointing the executor/administrator: The court officially appoints the executor (named in the will) or an administrator (if no will exists) to oversee the estate’s distribution.
  • Inventorying assets: The executor/administrator takes inventory of all estate assets — including bank accounts — that do not have a direct transfer mechanism.
  • Paying debts and taxes: The executor/administrator settles all the estate’s debts, such as taxes and bills, from the estate assets.
  • Distributing remaining assets: After all debts are paid, any remaining assets are distributed according to the will or state law.
  • Closing the estate: Once all assets are distributed, the executor/administrator petitions the court to close the estate.

Joint Account Holder With Right of Survivorship

Joint account holders with rights of survivorship can typically receive full access to the account by presenting a certified copy of the death certificate. Some banks may also require additional paperwork. Once the change is processed, the bank removes the deceased’s name from the account, giving the remaining owner full access.

Joint Account Authorized Signer

Unlike a joint account holder, authorized signers do not have ownership claims over the funds in the account. Upon the account holder’s death, authorized signers typically lose access to the account unless they are also named beneficiaries or can claim the account through another legal process.

Individual Account With TOD or POD

The named beneficiary on an account with a TOD or POD designation will likely need to present a certified death certificate, valid identification, and a completed claim form. Some banks may also require additional documentation to establish the beneficiary's claim on the account. Once the bank has verified the documentation, the funds are typically released to the beneficiary.

Handling Debts and Obligations

After an individual dies, the estate is responsible for their outstanding debts, including mortgages, loans, utility bills, and other financial obligations, such as taxes and funeral costs. An executor or administrator is responsible for paying the outstanding debts from the estate[5]. Typically, bank accounts are the most liquid source of funds.

The executor or administrator may wish to open a separate bank account owned by the estate and transfer funds from the deceased’s probated bank accounts to the estate account. This may be helpful to track estate-related transactions and provide a clear record to beneficiaries and creditors.

Seeking Advice and Assistance 

Whether settling someone's estate or looking to get your affairs in order, consider seeking professional assistance, particularly if you have a large estate or complex situation. Legal advice can help you understand the complexities of estate law and ensure your estate plan is up-to-date and legally sound.

A legal professional can also provide strategies to minimize taxes and ensure your beneficiaries receive their intended inheritance with as little inconvenience as possible.

Additionally, many financial institutions offer estate services designed to assist executors and administrators in managing and transferring assets. These services can include help with opening estate accounts, guidance on fulfilling the deceased's financial obligations, and support for distributing assets to beneficiaries. Engaging with these services early on can streamline the estate management process, reduce the likelihood of disputes, and ensure compliance with all legal requirements.