No one likes to contemplate their mortality. The old saying goes “you can’t take it with you,” but that leaves the question: What happens to the bank accounts that you leave behind? While the departed aren’t concerned, their heirs are affected by how the deceased set up or didn’t set up their bank accounts. The latter will leave a headache.
If the sole owner of a BSB account dies: What happens next depends on a few factors.
- If the deceased account holder established someone as a beneficiary (or account as Payable on Death or Transferable on Death to another person), the Bank will release the funds to the named person once it learns of the account holder’s death and is provided a death certificate. After that, the account is typically closed.
- If the owner of the account didn’t name a beneficiary or a POD, the process can get more complicated. The executor, or person who administers a person’s estate when he or she dies, will become responsible for using the money to repay creditors and divide the remaining funds according to the deceased’s will.
If it is a BSB joint account: Joint bank accounts include automatic rights of survivorship. In short, if one of the owners on the account passes away, the remaining owner (or owners) on the account retain ownership of the money in the account. That means that the surviving account owner can continue using the account, and the money in it, without any interruptions. Still, if you’re an owner on a joint account, it’s worth checking to make sure that the account has automatic rights of survivorship. Some banks will freeze joint accounts if one of the signers dies, which could be a problem if you rely on the account for regular spending.
Avoiding complications: Take the time to create proactive measures to help your loved ones avoid a headache of complications if you die.
- Authorized signers and Power of Attorney (POA) cease at death. For example: If you are listed as Power of Attorney for your mother’s checking account, this ceases on an account upon the death of the owner. Joint owners, POD and TOD accounts allow for the direct transfer of funds. Keep in mind, a POA cannot name themselves as a joint owner without the other owner’s consent and signature.
- Make sure that your family knows about all of your financial accounts. With the rise of online banking, it’s much easier for accounts to get lost in the shuffle. A good strategy is to consolidate your accounts to leave fewer accounts for your family to track down.
- Remember, it is illegal to withdraw money from an open account of someone who has died before you have informed the bank of the death and been granted probate, unless you are the other person named on a joint account. This is the case even if you need to access some of the money to pay for the funeral.
- You’ll also become fully responsible for paying any tax that comes due on income earned by the account when you take sole ownership of the account after the date of death.
No one likes to contemplate their mortality but making basic preparations with your finances can save your loved ones from financial stress while grieving your loss.