No one plans to die, and the turmoil and stress to untangle a loved one’s financial affairs can be complicated.
Most people assume their family will automatically know where their money is held and how to access it. Unfortunately, that's often not the case. Before any money can be distributed, family members first need to know that the account exists in the first place.
The First Challenge: Finding the Accounts
When a loved one passes away, family members are often left trying to piece together financial information during one of the most difficult times of their lives. They may know about a checking account at the local bank, but what about the online savings account opened years ago? Or the credit union account that hasn't been used recently?
An account cannot be claimed, closed, or distributed if nobody knows it exists.
What Happens to an Individual Bank Account?
In most cases, when a bank learns that an account holder has died, the account is frozen to help prevent fraud and unauthorized transactions.
The bank may require a certified copy of the death certificate and documentation showing who is legally authorized to handle the deceased person's affairs, such as:
- Letters Testamentary issued to an executor named in a will
- Letters of Administration issued by a court when there is no will
- Other legal documentation depending on state law
Once the proper documentation is provided, the funds can generally be distributed according to the account ownership structure, beneficiary designation, will, or applicable state law.
Joint Accounts
If the account is held as a joint account with rights of survivorship, ownership usually passes automatically to the surviving account holder. The surviving owner can typically continue using the account after providing the bank with a death certificate.
However, account rules can vary, so it's important to confirm the specific ownership arrangement with the financial institution.
Accounts With Beneficiaries
Many banks allow account owners to a beneficiary to the account - a Payable-on-Death (POD) beneficiary.
When the account owner dies, the funds generally pass directly to the named beneficiary without going through probate. The beneficiary usually must provide identification and a death certificate to claim the funds.
This can significantly simplify the transfer process.
Accounts Without Joint Owners or Beneficiaries
If an account is solely owned and has no beneficiary designation, the funds will typically become part of the deceased person's estate.
The executor or court-appointed administrator will generally be responsible for collecting the assets, paying debts, and distributing remaining funds according to the will or state intestacy laws.
This process may involve probate, which can take months or longer depending on the complexity of the estate.
What Happens if Nobody Finds the Account?
One of the biggest risks is that an account simply goes undiscovered.
If family members don't know an account exists, the money may sit dormant for years. Eventually, banks are generally required to turn abandoned funds over to the state through a process called escheatment. The money still belongs to the rightful owners or heirs, but locating and claiming it later can be time-consuming and difficult.
Billions of dollars in unclaimed property are currently being held by states across the United States.
The Bottom Line
The legal process for handling a bank account after death depends on how the account was titled and whether beneficiaries were named. But regardless of the account type, there is one step that always comes first: someone must know the account exists. Before families can access funds, they must first know which financial institutions held the deceased's accounts. The Only Step helps families record this information securely.
The Only Step helps families avoid the frustrating search for financial accounts by providing a secure place to record financial institutions and other important information. When the unexpected happens, loved ones know where to start, making an already difficult time a little easier.
