What Happens To Bank Accounts After Death In Canada?

You may have wondered what can happen to your finances after you pass away. Among other things, what will happen to your assets?  And more specifically, what happens to the cash sitting in your bank accounts? 

There are several ways that the money in your bank accounts might be dealt with. Read on to find out more so you can better prepare yourself and your loved ones. 

Key Points

• If you’re the sole owner of a bank account, the account will be closed and the funds will either be passed over to your beneficiaries or used to settle any outstanding debts.
• If you hold a joint bank account and pass away, the surviving holder can immediately claim any money or the funds may be absorbed by your estate (different rules apply in Quebec).
• Anyone with a legal claim to your bank account will need to meet with your financial institution, prove your identity and show a death certificate of the account holder.
• It’s always best to make arrangements in advance to ensure the money in your bank account goes where you’d like them to.

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 of your account, the first thing your financial institution 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 May Be Passed Down To Your Beneficiaries

Your heirs will inherit your account funds upon your death. But how your funds are distributed depends on whether or not you had a will in place:

• 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 among 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 May 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 that you may have. Other lenders may make a claim on your estate if you owed them money. 

What Happens To Bank Accounts After Death In Canada For Joint Owners?

A few things 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. 

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. Unless both joint account holders instruct the financial institution in writing of a specific arrangement in the event of one account holder’s death, the surviving account holder will get access to their share of the joint 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.

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. 

What Is A Payable On Death (POD) Account?

Any bank account where one or more beneficiaries are specifically 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

There are several benefits to a POD account, including the following:

• Streamlined Fund Distribution: Naming beneficiaries makes the fund distribution process a lot easier.
• No Probate: Your funds will not be subject to any probate fees, laws, or procedures.
• Funds Remain In Place: If it’s a joint account, the funds will remain in place until all holders have died.
• Beneficiaries Receive Their Fair Share: 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

Along with the perks of a POD account come some drawbacks:

• Probate May Be Involved If The Beneficiary Passes Early: If a beneficiary dies before you name an alternate, the account will go to probate.
• Not As Sound As Other Legal Options. POD accounts are not as legally binding as a will or the Power of Attorney.
• Potential Issues If POD And Will Don’t Match. 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.
• Court May Be Involved If You’re Mentally Unwell. 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?

If you don’t make advance arrangements, 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)

How Long Do You Have To Claim A Deceased Person’s Bank Accounts?

There isn’t a specific deadline that you have to meet to claim funds from an account. That said, it’s highly recommended that you deal with the claim swiftly. This is because there is a risk that the account could eventually be considered dormant. 

When this happens, banks may turn the account over to the government. You will likely still have access to the assets even if the account is deemed dormant, though you might have to take extra steps to get the funds. To avoid any issues, you’d be well-advised to make your claim soon after the death of the account holder.

What Happens To Your Debt After You Die?

On the one hand, you may wonder what will happen to the contents of your bank account upon your death. But what about your debt? Will your family be burdened with it, or will it just go away?

How your debt is handled depends on the type of debt and whether another person is named on the debt.

What Happens To Your Unsecured Debt When You Die?

If your unsecured debt — such as a credit card or personal loan — is only in your name, the creditor will collect what they’re owed through your estate. If no estate exists or your estate doesn’t have adequate assets to satisfy the debt, the debt will die with you, and your relatives will not be liable for the debt repayment.

However, if your debt is held jointly with someone else, the joint account holder will be responsible for paying off the remaining balance.

Learn more: What happens to your debt after you die?

What Happens To Your Secured Debt When You Die?

Secured debt — like car loans and mortgages — is tied to a valuable asset. It doesn’t go away when you die. Instead, the lender may repossess the asset, sell it, and use the proceeds of the sale to recoup the outstanding debt. 

If another person is named on the secured debt, they’ll be responsible for making payments. 

What Happens To Your Student Loan Debt When You Die?

Student loan debt is handled differently depending on whether it’s government-backed or private:

• Government Student Loan Debt: All government student debts are forgiven when the borrower dies and are not passed on to family members or the estate.
• Private Student Loan Debt: Private lenders are not legally obligated to discharge student loans if the borrower passes away, though they may choose to do so anyway. If the lender doesn’t forgive the debt, the outstanding balance is passed on to the estate.

Learn more: What happens to your student debt after you die?

Additional Reading

How Do I Transfer Money To A Bank Account?

What Is Open Banking?

What Happens to Your TFSA When You Die?

Bottom Line

While it may not be a pleasant thought, thinking about your finances before you pass away is essential to protecting your assets and ensuring that the right people gain access to your bank account. This will ensure that your desires are met in the event of your death and that your assets are treated the way you want them to be. It will also ensure that your loved ones are taken care of in the years that follow.

What Happens To Bank Accounts After Death In Canada FAQs