Unless you make provisions ahead of time, your bank account could be frozen in time after you die. There is much you can do to make things easier for your loved ones, however, so read on and find out how your bank account is affected by your death.
Jointly Held Bank Accounts
If you want to take the easier route to ensure that your loved ones don't have to deal with a frozen account, you might want to just add a joint owner. Jointly-owed accounts automatically pass to the survivor named on the account. It should be mentioned that it's not enough to have an authorized second signer on your account, they have to be joint owners.
Single Owner Bank Accounts
To protect the assets of the deceased, all banks automatically freeze bank accounts until the probate court directs them to distribute the assets held within to the estate or beneficiaries. This might take months to occur.
Limited Power of Attorney Designated Bank Accounts
It's not uncommon for some to appoint another person to help them with their financial affairs when they get sick, older, or incapacitated. Unfortunately, all powers of attorney automatically expire upon the grantor's death, including those allowing special powers to deal with bank accounts.
Payable on Death Designated Bank Accounts
This method of dealing with bank accounts can be a workable alternative to having joint ownership of an account. Before the death of the account's owner, no special powers are ceded. After the owner of the account passes away, though, a payable on death designation created prior to the death automatically comes into force. Payable on death designations name one or more persons who take ownership of the funds in the account when the bank is presented with the death certificate. The funds are distributed and the account is then closed. The bank account bypasses probate and is not listed among the estate assets. The persons designated on the payable on death forms can access the fund in as little as the time it takes for a death certificate to be issued.
While payable on death designated accounts are a handy way to avoid probate, it doesn't solve the immediate need for funds right after the death. Some enterprising families create special bank accounts with enough money to make the final arrangements and pay for other immediate expenses. The deceased and at least one survivor should be listed on the account.
Talk to an estate planning service to find out about other bank account solutions to meet your estate needs.
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