No matter what your living situation is like, there are a few things that can get complicated in the event of your death, particularly when it comes to your finances. For instance, the management of your estate will become particularly important, as it’s used to distribute your inheritance and, if necessary, cover your unpaid debts.
There are also a number of ways that the money in your bank accounts might be dealt with. Keep reading if you’d like to know what happens to your bank accounts after death in Canada, so you can better prepare yourself and your loved ones.
What Happens To Bank Accounts After Death In Canada?
Depending on whether you were the sole owner or if it was a joint account, what happens to your bank accounts after death in Canada will vary.
What Happens To Bank Accounts After Death In Canada For Sole Owners?
When you die as the sole owner, the first thing your bank or credit union will do is shut down your account.
Afterward, there are a few possible outcomes for whatever savings remain within, including but not limited to the following:
Your Savings Will Be Passed Down To Your Beneficiaries
- When You Have A Will – If you listed anyone on the account as a beneficiary, the leftover money will pass to them. If not, the executor of your estate is tasked with contacting any beneficiaries from your will and distributing your assets amongst them.
- When You Don’t Have A Will – If no will is found, the court will assign an administrator to divide up your money and transfer it to your heirs. Known as “intestate succession”, this process varies according to the provincial or territorial laws that govern your estate. Generally, your spouse would receive the majority of the money and the remaining inheritance will be distributed to your children or other next of kin.
Your Account Funds Will Be Used To Settle Any Accounts
Before the administrator takes control of finances, your financial institution will use part of your savings to pay off any outstanding personal loans or credit card bills. Other lenders may make a claim on your estate if you owed them enough.
What Happens To Bank Accounts After Death In Canada For Joint Owners?
Once again, there are a few things that can happen to your joint bank account if you pass away:
The Right Of Survivorship Takes Effect
This is a legal arrangement that joint account holders can make, which allows the surviving holder to immediately claim any money once you die. If that’s the case, the account will not become part of your estate, nor will it be subject to any probate fees.
The Account Gets Transferred To Your Estate
If you and the other account holder(s) did not establish a right of survivorship agreement, the money in the joint bank account will generally be absorbed by your estate. Afterward, the estate executor will be charged with disbursing the funds accordingly.
The Power of Attorney kicks in
If you signed a POA contract with your joint account holder or another person, your Power of Attorney, otherwise known as the “donor” or “mandator” (in Quebec), would kick in. When in effect, this document gives the “attorney” or “mediary” permission to manage your financial affairs, including your bank accounts, when you die.
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What Happens To Joint Bank Accounts After Death In Quebec?
Different rules apply in Quebec. Unlike other provinces and territories, there is no right of survivorship in Quebec. Instead, your bank would freeze your joint account and whatever money remains will become the property of:
- The surviving account holder(s) and;
- Your estate.
It’s also possible that the holder and your executor will come to a written agreement wherein a portion of the money will be transferred separately to the estate and to the survivor’s account.
Before you open a joint account, understand that what happens to it when you die will vary based on:
- The terms set by your financial institution
- The conditions of your will, and;
- The provincial or territorial laws that control your estate.
Will Your Credit Score Be Affected?
No, you credit scores will not be affected when your joint bank holder passes away. In fact, opening and closing bank accounts have no impact on your credit. If you’d like to keep tabs on your credit, you can do so for free on Compare Hub.
What Is A Joint Bank Account?
A joint bank account is when you open a shared account with one or more people. This usually is your spouse or common-law partner. These accounts are often used for the sake of convenience.
As such, a joint account can be a good way of saving more income and paying larger bills. There may even be certain tax benefits if you or another account holder transfers money from their personal account.
What Documents Are Required To Settle A Deceased’s Bank Account?
There are a few other financial matters that need to be addressed before your estate can be settled properly. For instance, prior to closing your accounts, your financial institution may request several documents to prove that you’re dead, such as:
- A death certificate
- A copy of your will (if any)
- Proof of the executor or administrator’s identity
As mentioned, if there are no beneficiaries listed on your accounts and you didn’t leave a will, your financial institution will wait until the provincial or territorial government designates an administrator for your estate. Once that’s done, a notice from the court and a death certificate will allow the administrator to secure the accounts.
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What Is A Payable On Death (POD) Account?
Any bank account where one or more beneficiaries are named is known as a “payable on death” account. In such scenarios, the beneficiaries will automatically be entitled to collect your remaining funds right away. As long as they can prove their identity and produce a death certificate, the account will not go to probate.
However, if all of your beneficiaries die before you, the funds will be transferred to your estate executor. They will then distribute them in accordance with standard government regulations.
Benefits Of A POD Account
- Naming beneficiaries makes the fund distribution process a lot easier
- Your funds will not be subject to any probate fees, laws, or procedures
- If it’s a joint account, the funds will remain in place until all holders have died
- If you name several beneficiaries, each will receive an equal portion of the funds
- Changing beneficiaries is easy. All you need is their name, SIN # and birth date
Drawbacks Of A POD Account
- If a beneficiary dies before you name an alternate, the account will go to probate
- POD accounts are not as legally binding as a will or the Power of Attorney
- If the terms of the POD do not match those of your will or estate plan, your estate beneficiaries may not be able to collect any of the leftover funds
- If you become mentally incapacitated, any family members who aren’t joint account holders must go to court in order to access the funds
How Can I Avoid Complications By Planning Ahead?
Unfortunately, your death could leave your loved ones struggling, particularly when it comes to finances. As such, it’s always a good idea to start planning as soon as possible to avoid these kinds of complications.
Here are a few preventative measures you can take to minimize any risks:
- Get advice from your financial institution, an estate planner, and a lawyer
- Set up a Power of Attorney agreement with someone you trust
- Think about who you’d like to name as your account beneficiaries
- Create a detailed Will and have it stored in a safe location
- Open a trust account (similar to a POD account, only you can name primary and secondary beneficiaries)
Bottom Line On What Happens To Bank Accounts After Death In Canada
As worrisome as it can be, preparing your finances for your eventual death is an extremely important part of protecting your loved ones and seeing that they’re taken care of in the years that follow.
