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What happens to a bank account after death?

How assets are divided up depends on whether or not there's a will.

When someone passes away, their estate will be divided up according to their will. But if there is no will, how everything will be divided up depends on what province or territory you’re in.

What happens to your bank account when you die?

When someone dies, their bank accounts are closed. The executor of the estate will be in charge of dividing the estate up according to the will, which is a legally binding document that outlines who receives the deceased’s assets following their death. If there is no will, the estate’s administrator will divide up the assets according to the provincial or territorial succession laws from where the deceased lived. In most cases, a majority or even all of the money will go to their spouse, and the remainder will be divided up among their children.

Any credit card debt or personal loan debt will be paid from the deceased’s bank accounts before the account administrator takes control of any assets.

Payable on death accounts

A bank account where a beneficiary is named is called a payable on death (POD) account. These accounts are useful to avoid probate and are common in the US. In Canada, however, only registered accounts like TFSAs and RRSPs can have named beneficiaries. Having a join bank account is the best way to avoid probate for a regular, non-registered bank account.

What happens to a bank account when someone dies without a will?

If someone dies without a will, assets and property are passed by succession to their heirs. Succession laws depend on the province or territory the deceased lived, and a court appoints an administrator who divides up the assets. In most cases, a majority, or even all of the money, goes to their spouse, and the remainder is divided up among their children.

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What happens to a joint account when someone dies?

If the deceased had a joint-account with someone else, such as a spouse, the account may stay open and accessible by the surviving account owner.

Generally, that does not hold true if the account is jointly-held by an adult child when a parent dies. In that case, legislation commonly dictates that the child will no longer have access to the parent’s account unless “right-of-survivorship” had been clearly established by the parent in writing. Note that there is no right-of-survivorship allowance in Quebec.

Required documents

Before the deceased’s estate can be settled and their bank accounts closed, the financial institution needs documents showing proof of death and who is responsible for handling the state. In most cases that will include:

  • Death certificate
  • A copy of the will
  • Proof of executor status

If the deceased has not left a will, the provincial or territorial courts will appoint an estate administrator. At that point, a letter from the probate court naming the estate’s administrator and a death certificate can suffice for the bank.

Contact the financial institution to start the process of settling the deceased’s bank accounts. The financial institution will provide a information advising of the next steps once they have received notice of death.

How do I claim a deceased person’s bank account?

There are a few simple steps to follow to claim a deceased person’s bank account if you’re the payable on death beneficiary:

  1. Visit or call the bank to start the claims process.
  2. Make sure you have your government-issued ID and a copy of the death certificate on hand. You’ll either show these, in-person, at the bank or submit digital copies.
  3. Fill out the bank’s paperwork, which was pre-signed by the deceased owner and states that you shall inherit the account.
  4. Withdraw the funds or move the money into a new account at the same bank.

What happens if I inherited a GIC?

If you inherit a GIC, there are three ways you can handle it:

  • Leave it alone until maturity. If you don’t need the money right away, you could leave the account alone and let it keep earning interest until it expires.
  • Withdraw the funds. Although GICs are known for having early withdrawal penalties, these usually don’t apply when the account owner dies, so you can withdraw the funds for free.
  • Transfer the GIC into your name. If rates have gone up since the deceased opened the account, you can transfer it into a new GIC and take advantage of the higher rate. Again, this may make sense if you don’t need the money right away.

How to avoid complications

Talk to an estate planning professional to minimize issues that can arise if you become unable to care for yourself. Consider the following when you meet with a professional:

  1. Add a power-of-attorney (POA). There are many different types of POAs. But a durable POA has the broadest powers and makes decisions about your health, finances and legal affairs while you’re alive.
  2. Create a trust account. There are many different types of trusts, so it’s important to speak with a professional about the best one for your situation.
  3. Spell out your wishes. Once your trust is established, layout how you want to distribute your bank account upon death.

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Bottom line

If you have a joint-bank account, in many cases the surviving member will be able to withdraw money from the account after the owner dies. If not, the bank account will be closed and its balance will be divided up according to the deceased’s will or the succession laws of the province or territory.

If you’re thinking about getting your affairs in order, the next step may be to consider taking out life insurance.

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