This article will answer the question of whether bank accounts go through probate and provide information on how to avoid probate for bank accounts.
What is Probate?
Probate is the legal process of administering a deceased person’s estate. This includes identifying and collecting the deceased person’s assets, paying their debts, and distributing the remaining assets to their beneficiaries.
Do Bank Accounts Go Through Probate?
Whether a bank account must go through probate depends on how the account was held – jointly or in the decedent’s sole name. Like real property, bank accounts can be owned in many ways.
Joint Accounts:
If a bank account is held jointly between two or more parties, there is usually a right of survivorship. This means that if two people are co-owners of an account, and one owner dies, the surviving owner inherits the account, without the need for probate.
Accounts with Designated Beneficiaries:
Similarly, if an account is held in an individual’s sole name, but has a beneficiary designated, the beneficiary can go to the bank and complete a claim form to inherit the account without any Court intervention upon the account holder’s death.
Accounts Held in Individual’s Sole Name:
However, if the account is held in an individual’s sole name without a co-owner or designated beneficiary, the funds in the bank account will pass through the decedent’s probate estate.
How to Avoid Probate for Bank Accounts
There are a few ways to avoid probate for bank accounts:
- Hold the account jointly with another person. This is the simplest way to avoid probate for a bank account. When you hold an account jointly with another person, the surviving owner will automatically inherit the account upon your death.
- Name a beneficiary on the account. You can also name a beneficiary on your bank account. This means that the person you name will inherit the account upon your death, without the need for probate.
- Create a living trust. A living trust is a legal document that allows you to transfer ownership of your assets to a trustee, who will manage them according to your instructions. If you create a living trust and name a beneficiary for your bank account, the beneficiary will inherit the account upon your death, without the need for probate.
Benefits of Avoiding Probate
There are several benefits to avoiding probate for bank accounts:
- Saves time and money. Probate can be a lengthy and expensive process. By avoiding probate, you can save your heirs time and money.
- Maintains privacy. Probate is a public process. By avoiding probate, you can keep your financial affairs private.
- Gives you more control over your assets. When you avoid probate, you can choose who will inherit your assets and how they will be distributed.
If you want to avoid probate for your bank accounts, you have a few options available to you. You can hold the account jointly with another person, name a beneficiary on the account, or create a living trust. Each of these options has its own benefits and drawbacks, so it is important to choose the option that is right for you.
Frequently Asked Questions
Q: What happens to a bank account if the owner dies without a will?
A: If the owner of a bank account dies without a will, the account will go through probate. The probate court will appoint an administrator to handle the estate, and the administrator will distribute the assets of the estate according to the laws of intestacy.
Q: What is the difference between a joint account and a payable-on-death (POD) account?
A: A joint account is owned by two or more people, and each owner has the right to withdraw funds from the account. A POD account is owned by one person, but another person is named as the beneficiary. The beneficiary will inherit the account upon the death of the owner.
Q: Can I name more than one beneficiary on my bank account?
A: Yes, you can name more than one beneficiary on your bank account. If you do so, the beneficiaries will inherit the account in equal shares.
Q: What happens if I change my mind about who I want to inherit my bank account?
A: You can change the beneficiary on your bank account at any time. Simply contact your bank and fill out a new beneficiary designation form.
Q: What if I don’t want to avoid probate for my bank account?
A: If you don’t want to avoid probate for your bank account, you don’t have to. You can simply leave the account in your name and let it pass through probate. However, this may not be the best option for everyone.
Q: How can I get more information about avoiding probate for bank accounts?
A: You can get more information about avoiding probate for bank accounts by talking to an estate planning attorney. An estate planning attorney can help you choose the best option for your situation.
Who Gets the Bank Account Funds?
Depending on how they owned the account, a deceased person’s bank account will be handled differently after their passing. To decide who receives the funds from the bank account, a number of questions must be addressed, including:
- Was the deceased person the sole owner of the account?
- Is there a named beneficiary?
- Did the decedent have a will?
As with most estate planning matters, by making an estate plan, you can decide exactly who will receive the funds from your bank account upon your death. On the other hand, people who pass away without an estate plan might find that their assets are distributed inadvertently.
Account Ownership and Beneficiary Designations
The account will go to the person you designated as the beneficiary or co-owner if you did. Even in the absence of a will, this is still true.
Bank accounts and certain other assets with joint owners or designated beneficiaries are transferred outside of the probate process. If your total probate assets are under North Carolina’s threshold for small estates, your estate may qualify for a simplified probate procedure as well.
One easy way to keep assets out of probate and make it clear who should receive the accounts is to name a beneficiary for your bank and retirement accounts. You should still have a will, though, in order to manage other kinds of property.