Legacy Planning: Granting Family Access to Your Bank Accounts

A woman showing a loved one how to access their bank account.

A death in the family is always a stressful time. Taking a simple action in advance can help alleviate some of the inevitable financial stress on loved ones and make transferring funds easier after you pass away. If you designate a beneficiary for your bank account(s), in advance, you can help your family more easily navigate this difficult time, at least from a financial perspective. 

Designating a Beneficiary 

A beneficiary is someone you designate to inherit your assets, including the funds in your bank account. Doing so and creating a valid will increases the likelihood of your funds being distributed as you would like.  

Just as you designate beneficiaries on life insurance policies, one of the easiest ways to ensure your loved ones will have access to your bank accounts after your passing is to designate a beneficiary.  

A beneficiary can access funds only after the account holder’s passing. Beneficiaries can be changed or removed by the account holder at any time. 

Accessing Bank Accounts 

The bank must release the funds to the beneficiary upon learning of the account holder’s passing. The bank will subsequently close the account.   

Before anyone, including a beneficiary, can access a deceased person’s accounts, the bank will need to be officially informed about the death. A family member will need to provide a death certificate, Social Security number, or any other legal documentation from the court to the appropriate party in the bank.  

Regardless of whether a will is in place, the bank must distribute the funds to the beneficiary if they present a death certificate and provide valid identification.  

Another way a bank can learn of an account holder’s passing is through the Social Security Administration (SSA). Funeral directors will inform the SSA of an individual’s passing to ensure that Social Security checks are not issued. Sometimes checks are already en route to the bank when the SSA is notified. To stop payment, a Social Security representative may contact a bank representative for return of the funds. A bank can learn of the account holder’s passing via this conversation.  

If there isn’t a beneficiary on the account, the distribution of funds may become complicated. That’s why it’s so helpful to family members to designate a beneficiary for your bank account(s). If an executor is appointed, they may become responsible for distributing the funds to repay creditors and will likely dispose of the remaining funds via a will.  

Who Gets Access When the Account Holder Has a Joint Account?  

Most joint bank accounts include an automatic right of survivorship—when one account holder passes away, the other signer is responsible for the funds. Not all banks provide an automatic right of survivorship, so it is up to the account holder to inquire about this designation. The surviving account holder will have the same access to funds, the ability to withdraw and deposit funds, as well as designate a beneficiary.  

What if the Account Holder Doesn’t Have a Beneficiary, Joint Account, or a Will?  

If the account holder is the sole owner of an account and hasn’t designated a beneficiary or doesn’t have a will, then a spouse or a loved one will have difficulty gaining access to the funds. The state will appoint an executor to the estate, and the funds in the account will be used to pay creditors. The remaining funds will be distributed to the heirs following inheritance laws.  

Designating beneficiaries in advance and letting the respective individuals know about the designation is a responsible way to ensure your wishes are honored after your passing and alleviate at least some of the inevitable stress on your loved ones. 

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