Estate Settlement Guide

Bank / Credit Union Accounts

What is it?

Bank accounts are financial institutions that allow one to deposit and withdraw funds, make payments, transfer money to another person or institution, pay bills electronically, and more. Your loved one likely had a bank or credit union account.

Why is this important to me?

Your ability to access the money in bank or credit union accounts is based on how the account was set up. Often bank accounts will have a beneficiary listed so upon the death of a bank account holder, the beneficiary can access the money. If the account was a “joint” account, the survivor can continue to access the money even with the deceased’s name on the account. If the account was only in the name of the account holder, there could have been a beneficiary listed, a POD (payable on death) indication, a TOD (transfer on death) indication or a Secondary Signer who can access the money. Without any of these ways to transfer the funds or to distribute the money, the bank or credit union may require the monies to go to probate or be claimed with a Small Estate Affidavit if the amount is less than the state probate minimum. If you are the executor of your loved one’s estate, you are responsible for the estate’s finances. This includes paying bills and managing any remaining income, as well as taking an inventory of assets and debts.

What do I need to do?

First, do NOT go to the bank or credit union to close the account or take your loved one’s name off the account. This may only present problems down the road. It is OK to leave the deceased’s name on the account for now. If the bank account is a Joint account, the survivor can continue to use the account as normal. In time, 3-6 months or more, the survivor can choose to take the loved one’s name off the account by taking a certified death certificate to the bank. Before doing this, you will want to make sure all deposits in the deceased’s name have been made and any withdrawals (for recurring payments or other expenses) have been changed to the survivor’s name. If the bank account was an Individual account, the first matter of business is to determine if anyone (a Secondary Signer, for example) has access to the account. If no one has access to the account, you will need to include the account in the probate process or use the Small Estate Affidavit explained earlier. If the bank account was in the Trust, meaning the name of the account is the Trust, the Successor Trustee can take a copy of the Trust and a certified death certificate to the bank to close access the money or close the account. If the account is closed, generally an estate account will need to be opened to administer the assets in the bank. There are some expenses that inevitably have to be paid, or keep being paid, immediately after your loved one’s death. This will likely occur before an estate account has been set up, and will have to be paid for by a source besides the estate of your loved one. You should begin to keep a record of such expenses paid by family or the executor soon after your loved one’s death. These expenses will usually be covered by the estate, and repayment can happen during probate. These expenses could include things such as:

• The funeral costs
• Attorney’s fees
• Mortgage payments
• Utility bills or other expenses related to your loved one’s home
• Car payments
• Insurance payments

Determine if your loved one had any other types of bank accounts, such as spending accounts. Accounts like health savings accounts (HSAs) are owned by the account holder and may be transferable, while flexible spending accounts (FSAs) are owned by the employer and won’t be transferable. But, they still could potentially be used to file reimbursement claims for expenses that took place before the death of the account-holder. An important step of settling your loved one’s finances is to find out if they had any debts. Besides the immediate expenses listed above, other common types of debts include;

• Medical debt
• Taxes
• Credit card debt
• Student loans

Once all assets and debts are determined, the executor or administrator of the estate will pay off the debts, typically from the estate checking account. If the estate checking account funds are not sufficient, further sales of assets may be required. If there are not enough assets to pay all debts, creditors will be paid in a specific order. This order is determined by state law and the probate court. This would result in the lowest-priority creditors not being paid once assets have run out. In this case, beneficiaries would also receive nothing from the estate, as debts are paid before anything is distributed to beneficiaries. The typical order of priority for debts (this varies by state, and it is best to consult with an attorney if more help is needed on this subject):

1. Mortgages and other secured debts
2. Court fees and any other costs of handling the estate
3. The out-of-pocket “immediate” expenses that family or the executor covered prior to probate
4. Funeral costs
5. Taxes
6. Medical expenses
7. All other unsecured debt
   1. This would include things such as credit card debt, student loans that were not forgiven, and other unsecured personal loans

Who is able to transfer?

Your loved one’s bank account may have been jointly-owned and passed on to the other owner such as their spouse. If there was no other owner on the account, the account can no longer be used and must be closed. Your loved one may have designated a POD (payable on death) beneficiary. The beneficiary would be able to claim the funds from the bank and transfer it to their own account, typically with a certified copy of the death certificate and ID. If no beneficiary was named on your loved one’s bank account, the funds will be transferred to the estate bank account during the probate process. Brokerage accounts operate similarly to bank accounts. If the account has a designated TOD (transfer on death) beneficiary, the stocks and bonds will pass directly to the beneficiary. With no designated TOD the stocks and bonds become part of the estate and will pass to the beneficiaries during probate.

Required Information Needed:

Information needed will vary depending on the type of bank account. Many commonly ask for the following:

• Copy of the Will or Trust
• Certified copy of the death certificate
• Letters testamentary or letters of administration (if applicable)
• A small estate affidavit (if applicable)

Step by Step Guide:

1. Identify/pay immediate expenses
2. Begin a record of expenses
3. Determine if bank account funds can be transferred to another account holder or POD beneficiary
4. Obtain letters testamentary/letters of administration (if applicable)
5. Once probate has begun, open an estate bank account
6. Determine if your loved one had other types of financial accounts
7. List known debts
8. Pay outstanding debts

Don’t have access to the bank account(s) or have questions about paying your loved one’s debts? We can match you with an attorney or other professional who can help.