What Happens To A Bank Account When Someone Dies?

What Happens To A Bank Account When Someone Dies?

According to a survey report by FDIC, almost 124.2 million households (81 percent) have at least one household member with a bank account. While these numbers are staggering, how familiar are we with what happens to bank accounts when someone dies? There is an old saying– “We come with nothing, and we will take nothing with us.” It is true about our bank accounts and their assets too.

Numerous questions may arise regarding a departed person’s bank account. For example, are bank accounts automatically frozen when someone dies? Or How long can you keep a bank account open after death? These questions may seem troubling without adequate information. One may be the sole owner or have a joint bank account. Each one goes through a different process of asset transfer upon death. This blog describes how.

What happens if the sole owner of an account dies?

The bank will often freeze the account if the single owner of a checking or savings account passes away, and the bank is aware of this. The bank will then inform the account’s chosen beneficiary, if there is one, and transfer ownership to them, but regulations vary by state. The beneficiary, entitled to ownership under specific circumstances, subsequently takes possession of the account.

Now you are wondering, Can a bank take money from a deceased person’s account? The answer would be if there are any credit card loans and personal loan debts, the bank will deduct that sum from the deceased’s bank account before transferring the rest of the assets to a beneficiary or closing it.

Transferring your bank account assets may be more difficult if you, the account’s sole owner, fail to choose a beneficiary. The executor, whom you entrusted to manage your estate, may need to pay off your debts using the money you have left behind and distribute it following your Will after you pass away.

Being the sole owner of a bank account, the easiest way to guarantee that your next kin and family members have access to your account after your death is to add transfer-on-death (TOD) or payable-on-death (POD) beneficiaries to your account.

What happens to joint accounts when someone dies?

A shared bank account gives one or more people complete access to all funds, regardless of who creates the account or makes any contributions. These people don’t need to be related. But in most cases, they are, for example, a husband and a wife.

If someone is a joint owner of a bank account with you, they automatically become the legal owner of the assets in the account after your death. They do not require to go through probate to access the assets. However, the bank must learn of the passing of the other account holder.

Mostly the joint accounts are set up with “Joint With Rights of Survivorship” (JWORS). It ensures uninterrupted assets transfer to the account holder who is still alive upon the death of one account holder.

Additionally, banks don’t close or freeze a joint bank account automatically upon the death of one owner. For example, if you are a joint account holder with your parents, closing bank account of deceased parent or keeping it open will ultimately depend on your wishes.

Even while a joint owner would probably inherit the entire account, this does not necessarily mean they would be liable for the decedent’s debts. However, depending on the circumstances, there can be income tax, estate tax, or inheritance tax that the surviving owner needs to pay.

What happens to a bank account when someone dies without a will?

A will is a legal document that outlines your wishes for assets distribution to your loved ones after your death. If you designate a beneficiary for your bank account but don’t have a will, the beneficiary will have access to our account until the probate process is over. The probate court would appoint an executor to oversee the distribution of the funds following the settlement of any debts if you fail to specify a beneficiary or leave a will.

The money in a bank account typically goes to the spouse or children if there is no will in place, though this law varies in different states. If you die without a will and don’t have a spouse or children, state law dictates the distribution of funds. It usually goes to the state.

Many might ask, how do you close a bank account of a deceased person without a will? Typically, the executor of the Will is in charge of closing the bank account of a dead person. The Administrator of the Estate, usually the primary beneficiary, may close the account if there is no Will or if the executors are unwilling to carry out their duties.

How do banks discover someone died?

A person’s assets are left behind when they pass away. A complex web of financial accounts and banking information is typically a part of one’s assets, and those accounts continue to exist even after a person dies. Once the bank learns about the account holder’s death, a beneficiary will receive all the funds from the account. But how does a bank know when someone dies?

Family Member

The primary method through which a bank learns of the passing away of an account holder is when the family informs them. If they have the required documentation, anyone can inform a bank that someone has passed away. However, the person’s kin or estate representative typically bears this burden.

One can bring a copy of the death certificate, the account holder’s Social Security number, and any other court-provided paperwork, including letters of testamentary given to the executor, to the bank to notify them of the account holder’s passing.

Social Security

So, does social security notify banks of death? The answer is yes, in a way. On behalf of the family, funeral directors often provide information to the Social Security Administration of a recipient’s passing, ensuring that no further Social Security checks are issued.

After a person passes away, payments from Social Security need to be repaid. Social Security gets in touch with the bank that received the payments and requests to return the check. This way, when social security puts in a request, the bank learns about the demise of an account holder.

How to avoid complications?

In challenging times your loved ones may become confused with questions like, What do I do with my deceased parents bank account? Who will receive the funds from the bank account once the original owner passes away? Here are a few steps to lessen the burdens of your beneficiary and family members, which they might face relating to your bank accounts after your death.

Prepare a Will

Even though your heirs may not necessarily escape probate if you have a will in place, you will at least have a guideline for your asset distribution. If you are the sole owner of a bank account and do not have a beneficiary setting up, a Will helps your estate executor understand who should receive the assets of your bank account.

Better to have a Joint Account Holder

It is simple to transfer money to other people by including a joint account holder with the right of survivorship. Although, adding joint account owners could have many unforeseen impacts. For instance, the other account owner may be liable to pay certain taxes.

Set-up Beneficiary

Consider designating payable-on-death (POD) or transfer-on-death (TOD) beneficiaries on your accounts to make it as simple as possible for your heirs to inherit your bank account following your passing. Beneficiaries with a POD registration need only to present proof of death paperwork to access the funds in your account. It will save them from the burdensome process of probate.

What is a beneficiary?

Beneficiaries are trusted persons, mainly your spouse, children, and family members, who hold the authority, as per your instruction, to take charge of your assets if something happens to you. Your bank may request appointing a “beneficiary” when you open an account. It is good to specify a beneficiary as it helps a smooth transition of ownership of your bank account funds without any court probate.

A court-appointed executor closing bank account or transferring your assets upon your death may come into the picture if you don’t add a beneficiary. A beneficiary on bank account probate will have the upper hand as the control of your account automatically passes to the designated beneficiary upon your death. It implies the beneficiary does not require to go through the probate process to gain authority to access the bank account assets.

Beneficiary rules

It’s customary to designate a beneficiary when you open bank accounts. But there are particular bank account beneficiary rules you must keep in mind before naming one.

After an account owner names a beneficiary, that person can only access the account after the owner passes away. The account owner has the right to modify or modify their designation at any time.

The assets in your account will be split evenly among all beneficiaries if you designate more than one. If the beneficiary passes away before you do or is unwilling to take the funds, you may appoint a dependent beneficiary who will get the money instead.

Assigning a beneficiary in a joint account does not overrule survivorship. If a married couple has a joint account, the surviving spouse will retain ownership of the account upon the death of the husband or wife. The beneficiary will not be able to access the money as long as the other owner is alive. The living owner holds the right to change the beneficiary designation.

There is another aspect to keep in mind, which is bank account beneficiary vs will. Beneficiary designations take priority over Wills. For instance, if your ex-spouse is named as the beneficiary of your bank account, while your Will specifies that money goes to a social service organization, the court will reject your desires.


Lastly, when grieving, closing the bank account of deceased parent or going through the complex process of it can become burdensome to your next kin. Few early preparations can save them from all the trouble. Moreover, you must make sure the bank knows of the demise of your loved ones to access funds or close them as per beneficiary rules, Will statement, and bank regulations.

We at Clocr make life easier with services like Digital Estate, Social Media Will, and many more. Using our “Digital Estate” service plan for your digital assets to help your loved one take measures according to your wishes after your demise. Your digital Will makes sure that your digital assets are in safe hands. Our services, such as Digital Vault and Digital Estate, will help you to protect your digital assets and let your wishes known to your next kin. Join Clocr today to leave behind an unforgettable digital legacy.