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What Happens to a Bank Account When Someone Dies?

Bank Account Beneficiary Rules to Know
Sarah Li Cain
Sarah Li CainUpdated April 4, 2023
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If you have an individual retirement account (IRA) or other investment account, you’re probably familiar with the process of naming a beneficiary. This is the person or persons who will inherit the account in the event of your death. But what about your checking and savings accounts? Do they need beneficiaries too?Banks typically don’t require you to name a beneficiary when you open a checking or savings account. It’s often up to you to initiate the process — and doing so can be a good idea. Without a beneficiary, the funds in a bank typically become part of the deceased person’s estate. This means they have to go through a longer process (called probate) before any heirs can receive the money.Read on for a deeper look into what happens to a bank account when someone dies and how to add a beneficiary to a bank account.

What Is a Bank Account Beneficiary?

A beneficiary for a bank account is a person or entity the account holder has chosen to receive the assets in the account upon their death.As an account holder, you can name one or several beneficiaries. If you pick more than one, the assets in your checking or savings account will be divided equally among all the beneficiaries. Or, you might decide to allocate the funds in a different way, such as 60% to one beneficiary and 40% to another. You may also be able to designate a contingent beneficiary for each beneficiary — this person will receive the money if the first beneficiary is no longer alive or is unable to receive the funds. 

How to Add a Beneficiary to a Bank Account

Banks typically don’t require you to name a beneficiary when you open a new bank account, so you may not have any listed for your accounts. To add a beneficiary, you can simply contact your bank and ask if you can designate a beneficiary on your accounts. The bank will likely provide you with a beneficiary designation form (called a "Totten trust") to fill out. This authorizes the bank to turn your account into a payable-upon-death (POD) account. This simply means the account’s funds can pass directly to any named beneficiaries after your death.To add beneficiaries, you typically need to provide the person’s full name, address, and birthdate, as well as their Social Security number or tax identification number and country of citizenship. Depending on the bank, you may be able to fill out this form online. Once you name one or more beneficiaries, it can be a good idea to review your designations at least once a year to ensure you’re still happy with your choices. Keep in mind that, even if you change your will at a future date, the beneficiaries you name for your bank accounts will take precedence over your will. 

What Are the Requirements to Be a Beneficiary?

There are generally no requirements to be a beneficiary. The beneficiary of your checking account or savings account can be your best friend, cousin, sibling, or child. You can even pick a favorite charity or nonprofit organization as a bank account beneficiary (provided they are recognized by the Internal Revenue Service as a charitable organization). You can’t name a company as a designated beneficiary, however.

What Happens if No Beneficiary Is Named on a Bank Account?

Exactly what happens if you die and there is no beneficiary named on the account will depend on the type of bank accountIf it’s a joint account, the co-owner of the account usually becomes the sole owner of the account, since joint accounts typically have automatic rights of survivorship. This means that the surviving account holder is able to use the account as they wish, including the money held in the account. If it’s not a joint account and there are no named beneficiaries, then the funds held in your account will go to your estate. All the assets in an estate need to go through probate before anyone can inherit the money. Probate is a legal proceeding in which the court supervises how the assets of your estate will be distributed. This process is complicated and can take several months, potentially even years if your estate is complex or someone contests the will. During that time, the money in the bank account could end up going towards paying the estate’s debts instead of going to your heirs. Recommended: What Happens to Credit Card Debts When You Die?

What Are a Beneficiary's Rights?

Your beneficiaries won’t have any rights or access to your bank account while you’re alive (unless it’s a joint account). That means you can do as you wish with your account, whether it’s make deposits, withdrawals, or close the account altogether. The only change you might see after naming beneficiaries is that the account is now referred to as an “in trust for” or ITF account.

When Can an Account Be Claimed by a Beneficiary?

A beneficiary can only claim the funds in your account once you pass away. At that point, they will need to provide the bank with a certified copy of the death certificate and personal identification and fill out a few forms. The bank will then transfer ownership of the account without any need to wait for probate. However, depending on what state you live in, there may be a brief waiting period before the bank can make the transfer.Recommended: ​​Guide to Transferring Money Between Banks 

POD or Payment on Death Accounts

To name a beneficiary to a checking or savings account, you need to convert the account into a POD account. A POD account is, essentially, an informal trust — a legal construct that shelters assets from probate after death. Once you fill out the beneficiary forms, the account will be considered a POD account. These accounts may also be called “In Trust For (ITF),” “Totten Trust,” or “Transfer on Death accounts.”

The Takeaway

Naming a beneficiary on your bank account is a common way to avoid probate and give your heirs access to funds quickly. It doesn’t take long to name a beneficiary, and the benefits can have far-reaching consequences, such as loved ones not having to wait months or potentially years for access. You can add beneficiaries to a savings or checking account you already own. If you’re looking for a new bank, you may be able to add beneficiaries as part of the account application process, or you may be able to do it right after you open the account.If you’re on the hunt for a savings account that offers a competitive annual percentage yield (APY), Lantern by SoFi can help. With our online banking marketplace, it’s easy to compare high-yield savings accounts based on APYs, fees, and balance minimums.Lantern can help you compare online savings accounts and find today’s best rate.

Frequently Asked Questions

Can a beneficiary access your bank account?
Who gets the money in a banking account when the owner dies?
Can a beneficiary on a bank account be overridden?
Photo credit: iStock/skynesher

About the Author

Sarah Li Cain

Sarah Li Cain

Sarah Li Cain is a finance writer and podcast producer focusing on topics such as credit, insurance, investing, and real estate. Her work has appeared in major publications such as CNBC Select, Forbes, Redbook, and Business Insider.
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