What Happens to Your Bank Account After Death?

If you’re the primary breadwinner for your family and you die unexpectedly, it’s important to have a plan in place so your family can have access to your accounts to make ends meet. This is often a matter of great concern for people when they are planning for the distribution of their estate, especially since the probate process can take anywhere from 6 months to a year.

At Brown & Hobkirk, PLLC we can advise you on the best options and strategies to help protect your assets and your family. This may include incorporating the following tools into your estate planning so your family will have quick access to the funds you worked so hard to accumulate.

Payable on Death

A Payable on Death (POD) account can be set up at your bank; it names a beneficiary for your account.

A POD is set up through a bank account or certificate of deposit at your bank or credit union. The POD operates just like any other bank account; simply by completing additional paperwork where you name a beneficiary for the account.

There are numerous accounts that can have a POD designation:

• Checking Account
• Savings Account
• Certificates of Deposit (CD)
• Investment or brokerage accounts- this type of POD would allow you to transfer your available funds and stocks or bonds to your desired loved one without the delay of the probate process.

There are many reasons you may choose to have a POD, including:

• If you are the primary source of income for your family
• If you want your beneficiaries to have immediate access to your bank accounts after your death
• If you have a high-risk job
• If you have investments (stocks, bonds, business interests) you want your beneficiaries to access immediately upon your death
• If you would like to avoid probate

Upon your death, the named beneficiary would be able to immediately access the account. This way, your heirs can have cash flow during the time it takes to probate your will. Keep in mind, as long as you’re alive, the money is yours to use as you wish. The beneficiary has no access or claim to it while you are alive. You can withdraw money or even close the account at any time, just like any other account.

The beneficiary only gains access to the POD account upon your death. In order to release the funds, the bank will usually require the designated beneficiary to fill out a claim form, provide appropriate identification, and to submit a copy of the death certificate.

Transferable on Death

A transferable on death (TOD) form allows you to transfer assets to named beneficiaries.

The process to set up a TOD is similar to setting up a POD. You will need to contact the entities holding your assets and complete a TOD form.

There are also numerous accounts that can have a TOD:

• Stocks and Bonds- In Arizona, you can register stocks and bonds on a TOD form. People commonly hold brokerage accounts this way. If you register an account with a TOD form, the named beneficiary will inherit the account automatically at your death. Probate court proceedings will not be necessary, because the beneficiary will deal directly with the brokerage company to transfer the account.
• Vehicle Registrations- In Arizona, if you register your vehicle with a TOD, the named beneficiary will automatically inherit the vehicle after your death. No probate court proceeding will be necessary.
• Real Estate- In Arizona, you can leave real estate with a TOD deed. This type of deed is also called a beneficiary deed. The deed is signed and recorded, but it doesn’t take effect until after your death. You can revoke the deed or sell the property at any time. The named beneficiary on the deed has no rights until after your death.

Estate Planning

It’s important to meet with an experienced attorney who can draft your estate planning documents to meet your financial situation and can help protect all your assets. A POD or TOD is not fool proof; it’s simply one tool in your estate planning tool kit. However, it shouldn’t be the only tool as there are limits to these types of designations. Take into account the following scenarios:

• If you name your spouse as a beneficiary and then divorce, the POD designation may be canceled.
• If the person you name as beneficiary has died, their heirs can inherit their share, but the process will have to be managed through probate.
• If there is a fight over your estate or named beneficiaries, the POD may be challenged.
• If your POD designation contradicts a provision in your will, it may also be challenged.

These scenarios could be avoided through a carefully crafted estate plan that takes into account all of your assets and properly utilizes all applicable estate planning tools (EX: Wills, Trusts, etc.).

Contact Us

If you live in Arizona, you will find the quality of advice you are looking for at the estate planning law firm of Brown & Hobkirk, PLLC. Our attorneys are devoted to assisting people like you with all aspects of estate planning. We will examine every aspect of your current situation, help you set estate planning goals, and then devise the most effective strategies to meet those goals.

Call Brown & Hobkirk, PLLC today to schedule a free consultation to learn how you can protect your assets and family.