How you handle bank accounts, like any other asset owned by a deceased individual, depends on how they were owned. Here are a few scenarios in which funds are handled and how one may go about handling them under certain circumstances.
Solely Owned Bank Accounts
If the deceased individual owned the account in his or her own name and did not identify a payable-on-death beneficiary, the account will certainly be subject to probate. Probate is the legal process that takes place after the death of an individual to make sure that their assets are properly collected and distributed to the appropriate beneficiaries by the appointed executor. If the deceased left behind an estate plan, identifying their beneficiaries is as simple as reading the will; if not, their assets will be distributed according to New York’s intestate succession laws. However, if the total amount of probate assets is low enough to count as a "small estate" under state law, the rightful heirs will be allowed to claim the money using either streamlined probate processes or an affidavit.
Accounts with a Payable-on-death Beneficiary
These are the straightforward ones: because the money is still not part of the deceased person's probate estate, you do not have any control over it as executor.
The money can be claimed by the beneficiary specified by the deceased individual by visiting the bank with a death certificate and identification. The paperwork in which the account owner chose the POD recipient should be kept with the bank.
Jointly Owned Accounts
In most situations, if a deceased individual has a joint account with another individual, the surviving co-owner becomes the account's owner immediately. To be transferred to a survivor, the account does not need to go through probate.
The Right of Survivorship
There are, however, exceptions to this general norm. The "right of survivorship" applies to most accounts that are held in the names of two individuals, but not all. In other words, if one of the co-owners dies, the money immediately passes to the surviving co-owner. (It typically works in the same manner with retirement funds.)
Sometimes it may be obvious that the account has a right of survivorship. Suppose the account is named "Lisa Johnson and William Johnson, JTWROS." (Joint tenants with right of survivorship is the acronym.)
It's likely still a joint tenancy account if the account registration document at the bank only includes two names without mentioning joint tenancy or right of survivorship. In Texas, for example, in order to establish a joint tenancy account, the account owners must sign a separate contract in addition to the bank's registration card.
Disputes About What The Deceased Intended
When two people—say, a married couple—open a joint account, no one will argue that when one of them dies, the assets in the account go to the survivor. When an elderly person adds someone else's name to an existing bank account, the situation may be different.
This is frequently done to avoid probate in the event of the original owner's death. However, the second name is often added only for the sake of convenience—that is, so that the other person may write checks on the account and assist the original owner. Alternatively, the arrangement is meant to provide simple access to the assets to the second person following the original owner's death, so that the funds may be utilized for the burial or other expenditures.
When the original account owner dies, the person whose name was added to the account legally becomes the outright owner of the money. Unless it’s in writing, any previous agreement about how the money should be spent is unenforceable. The money belongs to the new owner, who can spend it on anything he or she wants. If family members are certain that the deceased individual desired a different outcome, they will have a hard time getting the money back from the surviving joint account owner if they go to court.
Bank Accounts Held In Trusts
Many people put their significant assets in a living trust to avoid having to go through probate later. You'll be able to tell if the deceased individual had a bank account in trust based on the account statements, which will reveal who the account was owned by for example, "Lisa Johnson, trustee of the Lisa Johnson Revocable Living Trust dated September 9, 2003.”. The account, like other trust assets, is managed by the successor trustee, who takes over once the original trustee passes away. The funds will be transferred to whoever inherits them under the provisions of the trust deed by the successor trustee.
The Law Office of Inna Fershteyn can assist you in handling bank account funds in an estate. Please contact us at (718) 333-2395 for an experienced and diligent estate attorney who is familiar with the probate and trusts process.