What Happens to Your Bank Account After Death?

After you die several things can happen to your bank account, depending on the type of account you have, how you’ve set up your account before your passing, and whether you’ve set up a will or trust. Learn the common ways you can set up your account to make things as simple as possible after your passing and what will happen if you don’t set up anything beforehand.

Key Takeaways

  • Adding payable on death (POD) beneficiaries to your account is the easiest, cheapest way to make sure your heirs have easy access to your account after your passing.
  • Setting up a will or trust can help your heirs access money after your passing but may still go to probate.
  • Adding joint account holders with rights of survivorship makes things simpler after you pass but can lead to complications while you are living.
  • Doing nothing will make things more complicated and stressful for your survivors, so for their sake make sure you have something in place.

Name Beneficiaries

By far the easiest way to pass your bank account on to your heirs after your passing is to make sure you name payable-on-death (POD) beneficiaries on your accounts. POD beneficiaries differ from standard beneficiaries in a very distinct way. If you pass without a will in place, then the estate is declared intestate and will go to probate instead of directly to your beneficiaries. If you want money to go to your survivors in the simplest, quickest, and least stressful way possible, then you want to avoid probate as much as you can.

Once you have named a payable-on-death beneficiary, they will not have direct access to your money until you pass and you still retain the ability to change the named payable-on-death beneficiary at any time. This option is frequently referred to as a “poor man’s trust” since it essentially acts as a trust that easily transfers money to the person you designate, you can change it at any time and you don’t have to set up a costly trust through a lawyer and potentially pay fees anytime you want to make changes.

If you have listed someone as a POD beneficiary on your account, then after your passing all they will need to do to access the funds in the accounts is show a valid government ID and a copy of your death certificate.

Have a Will

If you have a will in place your heirs still may not necessarily avoid probate, but at the very least you will have a guideline in place for who gets your assets. The probate process can be very lengthy and your heirs may be required to hire costly probate attorneys depending on where they live. Your will becomes public knowledge after your passing and assets passed on through wills may still be subject to estate taxes.

Set up a Trust

A well-set-up trust will avoid probate and can reduce tax liability for your heirs. Unfortunately, not all trusts are equal and they are not always set up perfectly. Trusts can be expensive to set up and maintain and may not be worth the cost if you have a simple estate with few assets and few potential heirs. Even so, you need to set up a POD as well for your bank accounts, or retitle the accounts to the trust.

Add Account Holders

Adding account holders to your bank accounts can make things easier for your heirs after your passing but it can have downsides while you are living. Most joint account holders are considered joint tenants with rights of survivorship (JTWROS), which means that the account just passes to the survivor(s) when an account holder dies. Check with your bank if you’re unsure about the status of your account.

Having multiple account holders can be complicated while you are living. The other people named on your account may be subject to gift tax and have the ability to withdraw funds from the account whether you want them to or not. 

Additionally, the assets in the account are legally considered theirs for the purpose of qualifying for government programs or if they have a creditor with a judgment against them. Make sure that you trust the people you are naming on your account and think through the possible ramifications before you do so.

What Happens if You Have Nothing Set Up?

If you don’t set up anything before your passing, then your accounts will go to probate and be distributed according to your state’s laws. In most states, an executor will be appointed who will be responsible for paying off any creditors of the deceased.

The remaining money will be distributed to the spouse and children of the deceased. If the deceased has no survivors, no will or trust, beneficiaries or joint account holders, in most cases the estate’s funds will go to the state.

What Happens to a Bank Account When Someone Dies Without a Will?

If the deceased has named a beneficiary for the account, the person named will get access to it but only after the probate process has concluded.

If the deceased did not name a beneficiary or write a will, the probate court will name an executor to manage the distribution of the money after any debts are paid. This differs according to state law, but the money usually goes to the spouse or children.

If the deceased had no spouse or children, state law determines where the money goes. In most cases, it goes to the state.

How Can I Avoid Probate?

If you have a simple estate with no assets other than a bank account, then adding a payable-on-death beneficiary to your account(s) is the easiest way to avoid probate. If you have a complex estate or multiple heirs you want to leave things to, a trust may be your best option to avoid probate.

Do My Heirs Have to Pay Taxes on the Money in My Account?

It depends. Estate taxes have a relatively high threshold—$12.6 million in 2022. Gift taxes in comparison come into play if you “gift” your heirs more than $16,000. A common strategy is to gift your heirs up to the annual gift exclusion yearly if your main goal is to avoid gift taxes and your estate is small enough that you could gift away most of it to people who would gift it back if you were in financial need before your passing.

The Bottom Line

The easiest way to pass the money in your bank account to your heirs is to name them as payable-on-death beneficiaries on your account. Setting up a will or trust is an important part of estate planning but it may not guarantee that your heirs get access to your money quickly.

Adding account holders does make things easier after you pass, but make sure you understand the risks of doing so while you are living. No matter which option you choose, make sure you do something to make life easier for your survivors while they are grieving.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Federal Depository Insurance Corporation. “Financial Institution Employee’s Guide to Deposit Insurance,” Select, Section IX Informal Revocable Trust Accounts (Payable-on-death) (POD).

  2. Nolo. “Payable-on-Death (POD) Accounts: The Basics.”

  3. New York State Unified Court System. "Last Will and Testament."

  4. Internal Revenue Service. "Estate Tax."

  5. Consumer Financial Protection Bureau. "Can I Be Responsible to Pay Off the Debts of My Deceased Spouse?"

  6. Social Security Administration. "Program Operations Manual System (POMS): SI 01140.205 Joint Checking and Savings Accounts."

  7. Internal Revenue Service. "Gift Tax."

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