What Happens To A Bank Account When Someone Dies Without A Beneficiary?

What happens if no beneficiary is named on a bank account? On bank accounts and other financial assets, you can name a beneficiary so that they pass directly to the person you designate instead of going through the probate process. This ensures that the beneficiary gets access to the bank account directly after you pass away, although different banks have different bank account beneficiary rules. 

If someone dies without a designated beneficiary, the account must go through the regular bank account probate process before any heirs can access the funds. Alternatively, a joint bank account or spousal rights may allow funds to pass directly to the joint account holder or spouse when there is no beneficiary on a bank account. Find out how that works, and how to reclaim a bank account. 

Bank accounts with no named beneficiaries 

When there is no beneficiary on a bank account, including checking or savings accounts, funds will typically be frozen after the account owner dies. This prevents any new activity while the account goes through probate. 

As a part of this process, the executor or estate administrator will need to contact the financial institution to provide proof of death and their role in the estate. The financial institution will then work with the executor to transfer the funds to the estate or the beneficiaries of the will. 

The process of transferring funds from a deceased’s bank account can take some time to complete, as the financial institution typically must verify the identity of the executor and review the will before releasing the funds. It could be completed within a few weeks, but could also take longer if the bank needs to make additional verification.  

Typically, the entire probate process until named heir(s) receive access to funds can take a year. This will vary by state and the types of assets involved. More complicated assets like a business or business interests can slow down the whole bank account probate process, also delaying access to funds in any bank account. 

What happens if no beneficiary is named on a bank account?

What happens if no beneficiary is named on the bank account varies according to state laws and the type of account. For some situations, you may need an attorney. Below are some situations for different types of accounts and whether they will be treated as a no beneficiary on a bank account. 

Joint accounts

A joint account is the simplest structure for the transfer of funds on death. If you had a joint account holder, the ownership of the account will not change on death. But there can be additional complications, like whether you each shared ownership of the entire account or whether you each were considered partial owners of the account. You’ll also want to make sure the account states survivorship rights to ensure the joint account holder retains access to the account.  

If the entire account was shared between two or more people, on the death of one person, the survivors retain ownership of the account, depending on bank account beneficiary rules. But if each person had partial ownership, then the portion that belonged to the person who passed away would go through the probate estate process. 

Marital assets

In the case of bank accounts where both spouses aren’t joint account holders, some states allow a legal surviving spouse to automatically take possession of a bank account. Many states allow the surviving spouse to take a portion of the household’s marital assets. This includes bank accounts opened during the marriage and money earned during the marriage. 

State marital transfer laws are separate from the probate process. Under these state laws, a surviving spouse doesn’t need to inherit marital assets because they already own them. In this case, the account won’t be treated as a no-beneficiary bank account. It’s important to check your state’s laws as they apply to your situation.

Trust

If the bank account is held in a trust, the fate of the funds may be determined by the trust document. A trust that is well set up will ensure that the bank account avoids probate and may also reduce the tax liability for any heirs. For simple estates, a trust can be too costly to set up and maintain. In that case, you can set up a payment on death for your bank accounts or retitle the accounts as a trust. 

Final will

A final will and testament specify the distribution of your funds. Before a will is enacted, your estate will need to pass through the probate process and any debts settled. Except in rare cases, the funds will be distributed according to the terms of the will.

The bank account probate process can take a year or more, and the heirs may need to hire probate attorneys, further reducing their inheritance. In addition, your assets will be subject to estate taxes, and the will then becomes public knowledge.

Probate Law

Probate law applies to accounts with no beneficiary on the bank account or transfer-on-death order. For these bank accounts, state probate law applies to accounts of all sizes. Keep in mind that these laws are state specific. You’ll need to understand the laws in your state. 

Generally, under probate law assets, including bank accounts, are passed first to a spouse, then to children or other immediate family members in order of relation. If you have no close relatives, the money passes to the state. For probate law, close relatives usually extend to first cousins. 

You can prevent your funds from passing to the state by naming a beneficiary on your bank accounts and naming beneficiaries in a will.  A “remainder” clause in a will specifies the person who will inherit anything remaining after all heirs receive specific bequests. You can have heirs split the remainder as well. If you don’t have a remainder clause, any undistributed assets will pass through state probate law. 

Naming beneficiaries on bank accounts can help heirs avoid lengthy probate proceedings and associated costs. It can also help them avoid estate taxes, although as of 2022, estate taxes only apply to individuals with more than $12.06 million in net worth.

How to reclaim a bank account without a beneficiary

If a bank account has no named beneficiary the executor of the estate will need to gain access to the account. As the spouse of the deceased, in some states, you can also reclaim a bank account without a beneficiary. 

Contact the bank

Usually, the bank will have frozen assets in the bank account on confirmation of death. It’s important to contact the bank to present your case, learn its policies, and identify the next steps. This is usually the first step to avoid bank account probate. 

Death verification

The bank must verify the death. For this, it usually requires an original copy of the death certificate. In some cases, it may require a notarized death certificate. 

Proof of identification

You will likely need to prove your identity and your relationship to the person. For this, you’ll need a government-issued ID like a driver’s license or passport. You’ll also need a marriage certificate, birth certificate, and other legal documents that prove your relationship to the deceased. 

Court order

The bank may require a court order to claim the funds according to certain bank account beneficiary rules. Generally, if the estate of the deceased is small, claiming the bank account won’t require a court order. But if the estate is large, the bank may request letters of testamentary or a letter of administration to release the funds. 

Probate court system

As a last resort, if you’re unable to claim a bank account without a beneficiary, you may need to take the account through the probate court system to determine who the account should go to. As this is a lengthy process that can be costly, it’s worth setting up systems ahead of time, including naming beneficiaries on bank accounts, to avoid some of the bank account probate processes.

Final thoughts on bank accounts without beneficiaries

What happens to a bank account when someone dies without a beneficiary? Bank account beneficiary rules vary by bank, but setting up a joint bank account or designating beneficiaries can protect your heirs from bank account probate. If your loved one has no beneficiary on a bank account, you may be able to take control of the account after their passing, but this varies according to state laws. 

To protect your family and friends from hassle, it’s worth setting up beneficiaries on bank accounts, a clear will, and, in some cases, trusts to seamlessly pass assets on to them.

FAQ

Can next of kin withdraw money from a deceased person’s bank account?

It depends on their relationship, the structure of the bank account, and the state of residence. If the next of kin is a spouse, many states will allow them to take control of the bank account and withdraw funds. Other relatives, without a pay-on-death order or named beneficiary, usually cannot withdraw funds from a bank account without passing through probate.

Where does the money go if there’s no beneficiary on an account?

If there’s no beneficiary named on a bank account, money goes first to a spouse (in most states), heirs named in a will, or relatives up to first cousins. If there are no relatives, the money will go to the state.

Do banks need original death certificates?

Yes, some banks need original death certificates or notarized copies of death certificates. Other banks will accept a photocopy of the death certificate. Check with your bank for its policies.