Often, when an individual dies, the family wants money from the bank accounts, perhaps to pay for funeral costs and household bills or some other final expenses. The financial institutions will not release these funds, however, merely because the spouse, a child, or a beneficiary is a claimant. Depending on the title of the account, whether there is a beneficiary designation, and whether the account is part of a trust, there are some accounts that may have to go through probate.
An Orange County probate attorney can be of help to you when trying to decide if an account has to go through a probate case or if a certain account can transfer directly to the beneficiary.
When Bank Accounts Have to Go through Probate
Bank accounts often have to go through probate when they are in the sole name of the deceased individual and there are no beneficiary designations in the account. In this case, they are subject to the probate estate.
The legal process of probate (you can see this for yourself at https://en.wikipedia.org/wiki/Probate) collects the assets of the deceased, then pays his or her debts as they become legally due, and finally distributes the rest of the assets of the estate as the decedent’s will or law specifies. Even if the decedent left a will and the bank can see who the person left the funds to, the bank usually insists that they must get a court order before disbursing any funds.
The types of bank accounts that often have to go through probate are:
- Checking or money market account, or savings account with the name of the decedent, but no other person named on the account
- Accounts that do not have a beneficiary designation listed, including those that do not have a “payable on death” or “transfer on death” designation
- Accounts not titled in the name of a living trust
- Certificates of deposit where the only account holder listed is the decedent, and no co-owners with rights of survivorship is listed
So, if the bank tells the family that the account is locked because they require legal court orders, they will have to open a probate case in order to unlock those funds.
Bank Accounts That May Avoid Probate
There are also times when accounts do not have to go through probate. In these situations, the bank account passes from one owner to another owner (or heirs) when the decedent dies. This is referred to as passing the account outside of probate.
Joint Accounts: If the account owner had a surviving joint owner on that account and the account is a joint owner with rights of survivorship, the other owner may be able to claim the bank account by producing a copy of the death certificate. Joint accounts are commonly between husband and wife, but they may be between other relatives.
Payable on Death: A payable-on-death account is a special arrangement in which the account holder designates a beneficiary to receive the account’s assets upon the account holder’s death. The beneficiary may receive the account’s assets when they show a death certificate and proof of their identity. This only applies, however, if the decedent set up this beneficiary designation before the individual died.
Why Banks Freeze Accounts After Death
Depending on the title of the bank account, the family will need to show the bank a death certificate (helpful resources), documents to prove that the account is a trust account or a joint survivor account with a spouse or relative, or other probate documents to prove to the bank that the family has legal authority. When the bank account is owned only by the decedent, the financial institution will not allow any person to take money out until that authority is determined.
What to Gather Before Calling the Bank
- A certified copy of the decedent’s death certificate
- Recent account statement
- A copy of the decedent’s last will or a copy of the trust documents
- Any other beneficiary documents that may be related to the account or other assets
- Information on any joint accounts and other assets of the estate
Next Steps to Resolve the Issue
Does a bank account always have to go through probate? It may be required in some instances, but not all. Depending on whether the bank accounts are owned jointly, whether a beneficiary is named, the planning of the trust, and the overall size of the estate, probate may be required, or it may be able to transfer the account directly.
So, even if you think that an account is locked because it must go through probate, take a look at the account title and the papers on file at the bank to see if you need to proceed with that step. When you and the attorney have the correct documents and a clear understanding of the procedures, you will not have to waste time trying to figure it out on your own but can confidently move forward with the resolution.
