What Happens to Bank Accounts When Someone Passes Away?
When people pass away, they may not have huge estates, millions of dollars, and complex investments to pass on to friends and family members. What they may have are bank accounts—in fact, most all of us do. But what happens to a bank account when we pass on? And how can you leave what’s in your bank account to friends or family (or anybody else)?
Joint Accounts and Automatic Transfers
If you have a joint bank account, which many people do with a spouse, but may also have with children, Florida law says that the entirety of the account transfers solely into the name of the co-owner of the account when the other co-owner passes on.
Anybody challenging this in probate court would have to show by “clear and convincing evidence” that it should not pass to the co-owner.
So if that’s what you want to happen with your bank accounts, you don’t have to do much of anything when it comes to estate planning. But that may not be what you want to happen.
For example, imagine you have a bank account with your spouse. When you pass you would like some of the funds in the bank account to go to parents or grandparents or perhaps to children of a prior marriage. In that case, you may need estate documents to designate whether the balances in your bank account will go.
Use of POD Bank Accounts
You can also designate a bank account as payable on death or POD. The person you designate, does not have to be a co-owner of the account or have his or her name on the account. One benefit of POD accounts is that they avoid probate completely—upon death, and outside of court, the entirety of the account will transfer to whomever is designated.
Pros and Cons of POD Accounts
POD accounts are easy and quick and avoid probate—but they can be problematic. You can’t designate a backup beneficiary. So if the person designated to get the bank account predeceases you, the account will end up needing to be probated, and passing accounting to Florida’s intestate laws.
You can’t divide a POD account between multiple people—100% of the POD account has to go to one person. You also can’t condition funds. On your death, 100% of the funds will go to whomever is designated. Unlike with a trust, you can’t condition receipt of the funds on an occurrence or a date, or time out periodic payment of the funds in the bank account.
Many people make the mistake of designating a bank account as POD, and then later, drafting estate documents with instructions contrary to what is on the POD account. This can lead to litigation in the probate court to figure out what you really wanted to happen with your bank account.
Call the West Palm Beach probate lawyers at The Law Offices of Larry E. Bray today for help managing your assets and with any probate court problem or case that you may have.