What Happens To My Bank Accounts After I Die?

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 when you die, so you can better prepare yourself and your loved ones. 

Related:

• What happens to your debt after you die?
• What happens to your student debt after you die?
• Dealing with the financial outcome of the death of a spouse

What Happens To My Bank Account If I’m The Sole Owner?

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:

• 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. 
• 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. 
• 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. 
• 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.

What Documents Are Required To Settle Deceased Bank Accounts?

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 Happens If I Have A Joint Bank Account?

A joint bank account is when you open a shared account with one or more people (usually your spouse or common-law partner). These accounts are often used for the sake of convenience or because one of the account holders has a health condition that prevents them from banking responsibly. 

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. 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 – Before you died, it’s possible that you, otherwise known as the “donor” or “mandator” (in Quebec), signed a POA contract with your joint account holder or another person. When in effect, this document gives the “attorney” or “mandatary” permission to manage your financial affairs, including your bank accounts, when you die. 
• 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 both 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, keep in mind that the circumstances of what happens to it when you die may change according to the terms set by your financial institution, the conditions of your will, and the provincial or territorial laws that control your estate.

For example, during the probate process, your estate beneficiaries may challenge the terms of the surviving holder’s ownership over the account if they have an interest in it. In that case, the surviving account holder may have to showcase their Power of Attorney or defend your intention in some other way to claim the joint funds. 

What Is A Payable On Death 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 one or all of the beneficiaries die before you, the funds will once again be transferred to your estate executor, who will 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 come suddenly and leave your loved ones struggling to pick up the pieces, particularly when it comes to your remaining finances. Although that may happen years down the line, it’s always a good idea to start planning as soon as possible to avoid these kinds of complications when the day comes. 

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) 

Find out how life insurance can protect your family from debt. 

Worried About Your Surviving Loved Ones?

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.