You work hard to protect your family. Estate planning will ensure that they’re protected even when you’re gone. The bank account probate process can be slow, leaving heirs waiting for funds for sometimes a year or more. And if you’ve planned to make a donation after death to a cause you believe in, setting up the structures for them to get the funds right away can be a sort of parting gift.
A number of legal structures to avoid bank account probate are available, whether you want to make sure your family has the money they need, make a donation, or fund a company. In most cases, you don’t want your bank account to not have a beneficiary. Below are the options to consider for your individual financial goals.
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What is probate on bank accounts?
Probate is the official proof process of a will. This process happens in a court, after which the estate is settled. During the bank account probate process, all creditors are paid before the remaining funds are dispersed to heirs. A bank account goes through probate if there is no joint owner or designated beneficiary.
During bank account probate, the heirs will not have access to the funds until the probate process is complete and all debts are paid.
Do bank accounts have to go through probate?
Bank accounts don’t have to go through bank account probate if there is a joint account holder or beneficiary. For example, if you and your spouse are joint account holders on your savings account when one of you dies, the other joint account holder will retain access to the account and its funds.
On the other hand, if both you and your spouse die at the same time and there is no designated beneficiary on the account, the bank account will go through probate. If you both decide to designate your daughter as the beneficiary, she can go to the bank and complete a claim form to inherit the account without court intervention.
Will banks release money without probate?
Banks will release money without probate if you have specified a beneficiary or have a joint account holder. Otherwise, the bank account will have to pass through bank account probate. The other option to avoid probate is to create a living trust or a transfer-on-death account. But if you have a regular bank account without any of these options, the bank won’t release the money without a bank account probate.
Ways to avoid probate on bank accounts
If you want to avoid bank account probate you have a number of options, from joint accounts to transfer-on-death bank accounts, that are relatively simple to set up. It’s worth taking the steps to set up one or more of these structures to ensure that your heirs have immediate access to the funds they need.
With a beneficiary or beneficiaries designated, they will have the right to access the money in the bank account once you are deceased. As long as you are alive, the beneficiaries won’t have access to the account. Your bank account will function just as it did without beneficiaries. You can also change or rename beneficiaries as many times as you want within your lifetime.
After your death, the account becomes the property of the beneficiaries. They will usually need to fill out a form at the bank and present both your death certificate and their ID to access the account according to your wishes. Depending on the account type, they may have the option to continue using the account or may be able to withdraw the funds and close the account.
No beneficiary on a bank account means that either one of the other legal structures is in place, or the account will go through bank account probate.
Create a living trust
Another option is to create a living trust. With a living trust, the trust owns the assets you choose to put into it. When setting up a living trust, you’ll outline your wishes in a trust document. As a part of this, you’ll name a trustee to manage the trust as well as beneficiaries to receive the assets after you die.
You can transfer most assets into a living trust, including your home, stock portfolio, or bank account. During your lifetime, you may be able to appoint yourself as the trustee and then name a successor trustee after your death. A living trust doesn’t pass through bank account probate, so all assets you put into the trust will go directly to the designated beneficiaries.
A payable-on-death account designates a beneficiary or beneficiaries other than the owner or co-owner of a bank account. In a payable-on-death account, the beneficiaries receive the balance of the account after the last owner dies. In addition to individuals, you can designate groups of individuals, companies, non-profits, organizations, or trusts as beneficiaries in a payable-on-death account.
This is one option for wealthy individuals to pass on funds to nonprofits or organizations of their choice without the delay of bank account probate.
A transfer-on-death bank account is used to automatically transfer assets to a designated beneficiary when the primary account holder dies. The transfer-on-death account structure can be used for most asset classes, including stocks, real estate, and more. For example, if you have a transfer-on-death bank account and other accounts in place that include both your home and a savings account with $75,000 in it, both will be transferred to the named beneficiary at your death.
Some bank accounts, investment accounts, and deeds are automatically set up as transfer-on-death accounts. Check with your bank or estate planner to confirm your current account structures.
Joint accounts or ownership
Joint bank accounts and other assets will automatically avoid probate and remain in the possession of the joint account holder or owner. If you have three joint bank accounts with your spouse, all will remain in their possession after your death. Likewise, if you have a joint bank account with your children, they will retain ownership of that account and avoid bank account probate
Keep in mind that joint accounts or ownership only apply to the specific account. If you have four bank accounts but only hold one joint bank account with your spouse, you will want to designate them as a beneficiary, make them joint account holders or choose one of the other options above to avoid bank account probate.
Final thoughts on how to avoid probate on bank accounts
Avoid having no beneficiary on a bank account and protect your family in the future. From transfer-on-death bank accounts to living trusts, setting up structures to pass on your assets will ensure you can protect your family and promote causes important to you even after death. Estate planning to avoid probate on bank accounts is a lasting gift to your family and friends. With these structures, they can quickly gain access to needed funds for everything from funeral expenses to house payments or other financial needs.
Can I access my bank account without probate?
That depends. If you were named as a beneficiary on a bank account, or you’re a joint account owner, then you can access the bank account without probate.
When a person dies what happens to their bank account?
If you haven’t taken one of the steps mentioned above, your bank account will be closed and the money in the account will become part of your estate and go through the probate process.
Does a bank beneficiary go through probate?
No, a bank account beneficiary does not have to go through bank account probate before getting access to funds in a bank account. You can go to the bank with your ID and the death certificate to get access to a bank account if you’re named as the beneficiary.