What happens to your bank accounts after death

What happens to bank accounts when someone passes away
In Ontario, when a person passes away with a personal bank account, it is the executor’s job to notify the financial institution and provide them with an original or notarized copy of the death certificate, notarized copy of the Will to confirm executor’s status, and two forms of ID to confirm their own identity. At this time, any outstanding bills or invoices that need to be urgently addressed can be provided to the bank for immediate payout. Once a financial institution is notified of an account holder’s passing and provided with the require documents, it will protect the deceased’s estate by limiting access to the assets held within the account. Some banks will establish an estate account, which will be used for ongoing estate administration activity such as paying expenses, legal fees, and probate tax. Once the account holder’s estate has been finalized, the account will be closed. It is important to note, that if an account holder passes away without a legal Will, and thus no named Estate Trustee, the financial institution can and should still be notified of the person’s death. Being provided with a valid death certificate will grant the bank power to restrict account activity until an Estate Trustee is named by the court.

With regards to bank accounts that are held jointly between two or more people, there are other factors that will be taken into consideration following the death of one of the holders. They are:
• The relationship between account holders, such as if they are spouses or parents and children;
• The common account activity, such as who contributes the most monies or if there is a primary depositor; and
• Whether intentions of the primary account holder have been clearly stated with the use of a legal Will.

If a joint account is held between spouses and one of them passes, it is a legally accepted presumption that any remaining proceeds are to be advanced to the survivor. However, in the case that a joint account is held between a parent and an adult child, this presumption does not exist. In fact, unless it can be proven that the survivor is a regular depositor of the account, then the account will be subject to the same rules and regulations as if it was held solely by the deceased. Also, even if a child has been added as a joint holder to a parent’s account for the specific purpose of estate planning, the account’s assets will still be considered part of the parent’s overall estate, meaning they will be subject to distribution according to the parent’s Will. If the intention is to gift the account’s proceeds to that child, then it will have to be explicitly referred to in the Last Will and Testament, further highlighting the importance of securing proper and legal estate planning documents.

In the case of business bank accounts, much of what happens will be dependent on how your business has been structured. For example,
• In a Sole Proprietorship, the business and the owner are one and the same, meaning both personal and business assets (and debts) are pooled together. Following death, all bank accounts would be restricted and all combined debts paid out from the entire estate before any proceeds are distributed to any heirs.
• Corporations, however, are not as directly affected by their owner’s passing. Following death, the owner’s shares become the property of his or her estate, which will then be distributed as outlined in the deceased’s Will or by intestacy laws. In a subsequent video we will discuss the difference between and benefit to having segregated Wills for personal and corporate assets.

Ultimately, characteristics between accounts will differ depending on the assets that are held within them and the reason for their existence, such as for retirement, business, personal, or in trust for future generations, just to name just a few. When making your estate plan, it would be wise to take your financial institution’s account closing policies and procedures into consideration when meeting with your financial and legal advisors.

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