Probate is a legal process that occurs after someone passes away. It involves validating their will, paying off debts, and distributing their assets to beneficiaries. During this time, many people wonder if bank accounts are subject to probate. In this article, we’ll explore the question, “Do bank accounts go through probate?” in detail.
Understanding Probate
Before diving into the specifics of bank accounts, let’s first understand the probate process. When a person dies, their estate goes through probate to ensure that their affairs are settled according to their wishes. This process is usually supervised by a court and can take several months to complete.
During probate, the deceased person’s assets are identified, debts are paid off, and the remaining assets are distributed to the beneficiaries. It is important to note that not all assets go through probate, and bank accounts fall into this category.
Bank Accounts and Probate
Bank accounts often do not go through probate. This is because most bank accounts offer a beneficiary designation option. When an account holder designates a beneficiary, it allows the funds in the account to transfer directly to the named beneficiary upon the account holder’s death.
When a beneficiary designation is in place, the bank account does not become part of the deceased person’s estate and therefore does not require probate. The designated beneficiary can easily access the funds without any legal complications.
Types of Bank Accounts
It’s essential to understand the different types of bank accounts and how they are treated in terms of probate:
1. Joint Bank Accounts
If a bank account is held jointly, such as a joint checking or savings account, it automatically passes to the surviving account holder upon the other account holder’s death. This is known as the “right of survivorship,” and probate is typically not required.
2. Payable-on-Death (POD) Accounts
Payable-on-Death accounts are also commonly referred to as “transfer-on-death” or “in-trust-for” accounts. These accounts allow the account holder to name one or more beneficiaries who will inherit the funds upon their death. The named beneficiaries can claim the funds without going through probate.
3. Trust Accounts
A trust account is created by a person (known as the grantor) to hold assets for the benefit of another person (known as the beneficiary). When the grantor passes away, the assets held in the trust account transfer directly to the beneficiary without the need for probate.
4. Single-Owned Bank Accounts
If a bank account is solely owned and no beneficiary designation is in place, it will likely go through probate. In this case, the account becomes part of the deceased person’s estate, and the court oversees the distribution of the funds according to the will or state laws.
Avoiding Probate for Bank Accounts
If you wish to avoid probate for your bank accounts, there are a few options available:
1. Designate Beneficiaries
Ensure you have designated beneficiaries for your bank accounts. Contact your bank to inquire about beneficiary designation forms and instructions. Review and update these designations regularly to keep them current.
2. Establish a Trust
Create a trust and transfer ownership of your bank accounts to the trust. By doing so, the trust becomes the account owner, and the designated beneficiaries will receive the funds directly without probate.
3. Joint Ownership
If you have a spouse or partner, consider opening joint bank accounts. This way, the account will automatically pass to the surviving account holder without probate.
In Conclusion
When it comes to bank accounts and probate, the general rule is that accounts with designated beneficiaries or held jointly do not go through probate. However, single-owned accounts without beneficiary designations may require probate. To ensure your bank accounts are handled according to your wishes, it’s important to understand the different options available and take appropriate steps, such as designating beneficiaries or establishing a trust.
By being proactive and planning ahead, you can potentially save your loved ones from unnecessary legal complexities and delays in accessing the funds held in your bank accounts.