WHAT HAPPENS TO CHECKING AND SAVINGS BANK ACCOUNTS AND CERTIFICATES OF DEPOSIT WHEN SOMEONE DIES?
People often neglect to include checking and savings bank accounts and certificates of deposit when making arrangements for distribution of their assets after death. The deposit agreement between the bank and the account holder is one determinant for what happens when the owner dies.
However, if the deceased person had an individual account with no provisions for a beneficiary, the legal options for handling the bank account vary based on state laws, marital status and whether a will was left. Someone who has not clarified his/her wishes in writing might be leaving her bank accounts to distribution under state laws, or the accounts might go to an inheritor who will not use the assets as he/she intended.
Wills and Intestate LawsGenerally, with the exception of Payable-on Death and Joint Accounts (see below for information), a last will and testament dictates who will inherits a deceased person's assets, including checking and savings bank accounts and certificates of deposit. A person who does not leave a will dies intestate. If no other provisions were made regarding the accounts, the state determines beneficiaries using its intestate laws. The probate court assigns a personal representative who distributes all of the assets, including accounts, using the list of heirs in the state's statutes of descent. The list begins with the closest living relative of the deceased person and continues through the line of descent. Under state laws, the bank might be required to send the funds to the state's unclaimed property office if the rightful owner cannot be located.
Payable-on-Death AccountsPayable-on-death accounts offer an easy ways to keep money--even large sums of it--out of probate. All you need to do is properly notify your bank of whom you want to inherit the money in the checking, savings, and/or certificates of deposit. The bank and the beneficiary you name will do the rest, bypassing probate court entirely. Some states allow an account holder to name more than one beneficiary. When the account owner dies, the funds in the account automatically go to your named beneficiary without going through probate or being mingled with other assets for distribution under a last will and testament. Of course, the POD beneficiary has no access to the funds until the account owner dies.
Joint AccountsThe surviving owner of a joint account becomes the owner of all of the funds in the account, regardless of how much money either owner deposited in the account or whether the account contract limited the surviving owner's access to the account. The deceased person's share of a joint account is not part of the person's estate or subject to his/her will. The funds cannot be claimed by heirs or creditors.
Joint accounts can be set up several different ways, but most joint accounts include rights of survivorship. This means the surviving account holder automatically owns the entire account when the other owner dies. For example, if you and your spouse own a joint account with rights of survivorship, your spouse automatically receives full ownership rights to the account as soon as you pass away - without the account ever entering the probate process. Typically, your spouse would only have to provide a copy of your death certificate to the bank to have the funds placed completely in his/her name. Thus, your executor never has control over the account since it never becomes a probate asset.
Community Property States Such as CaliforniaCalifornia law defines community property as any asset acquired or income earned by a married person while living with a spouse. Separate property is defined as anything acquired by a spouse before marriage, during marriage by gift, devise, or bequest, and after the parties separate.
The account of a deceased person might be the property of a spouse if the couple lived in one of the nine community property states. The community property states -- Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Washington, Texas and Wisconsin -- consider assets acquired before the marriage to be separate property. However, under their community property laws, all assets a couple acquires during marriage are considered marital property and are owned 50/50 by each spouse.
However, an account that is separate property of one spouse may become marital property if after-marriage assets are deposited in the separate property account. A couple's handling of marital and personal assets, and the deceased person's will or other legally binding arrangements, determines who inherits the deceased person's financial accounts.