Bank Accounts

Whether you’re the executor of an estate, or you’re trying to better understand what will happen to your estate when you die, it’s important to know about how bank accounts are handled after a person passes away.

We’re going to go over the key points you need to understand - the different ways money from a bank account can be distributed after death, and how to close a bank account when a person has passed away. We’ll also discuss how estate planning can help make transferring funds from a bank account easier. 

The information presented here is relevant in the Province of Manitoba - if you live in a different province, rules and regulations may differ.

What happens to a bank account when someone passes away?

The bank accounts of the deceased are frozen by the bank once they receive notice that the account holder has passed away. There are exceptions to this rule, however. We’ll discuss these exceptions more in the next section, where we cover joint bank accounts.

Banks can receive notification of death in a variety of different ways - more often than not, however, they’re notified by the estate’s executor. The executor will require access to the account in order to manage the affairs of the estate - they may not, however, be granted immediate access. Documentation is required, and some essential documents (such as Grant of Probate) take time to acquire.

While a bank account is frozen, certain activities may still take place. The bank may, under certain circumstances, allow for certain funerary or legal fees to be withdrawn from a frozen account. Talk with your bank about how they handle frozen accounts after death for more information.

In order to settle the estate, the executor will need to open an estate account. This account can accept deposits, such as final CPP/OAS/GIS cheques, as well as the CPP Death Benefit. It will also be used to pay creditors, pay final income taxes, and distribute the estate in accordance with the deceased’s Will (if a Will has been left). 

When there is no Will, funds in the bank account (as well as in the estate as a whole) will be distributed as per the rules of intestate succession.

Generally, the funds found in bank accounts are not automatically transferred to a beneficiary (with the exception of joint accounts, whose funds are transferred to the joint account holder). With TFSAs, RRSPs, and certain other kinds of accounts, however, a beneficiary may be named. In these circumstances, the funds contained within that account will be transferred to the beneficiary or beneficiaries in accordance with the instrument used to name the beneficiary.

If that last paragraph seems a bit daunting, don’t worry - financial advisors and legal counsel will help you determine how beneficiaries are named for certain investment accounts, and how benefits can be paid out.

What happens if it's a joint bank account?

In Manitoba, when a joint bank account is held between the deceased and a living person, the living person (called the survivor) automatically becomes the full owner of that account and its assets.

This rule, sometimes called the Right of Survivorship, supersedes any clauses in the deceased’s Will. This is because the funds in the account never become a part of the deceased’s estate, and Wills can only dictate how assets within a person’s estate are distributed. 

Generally, joint accounts should not be used as estate accounts, as the funds within the joint account are not subject to the Will or rules of intestate succession. Keeping a separate estate account makes handling finances and settling the estate easier.

What is required to settle a bank account?

To settle a bank account, and open an estate account, an executor will need to provide:

A death certificate (proof of death)

The last Will

Notarial copies of these documents can be used in place of originals. When you visit the bank, it’s a good idea to bring estate-related bills and invoices with you, such as utilities related to estate properties. 

The estate account will be considered settled, and can be closed, once all of the funds within it have been distributed according to the Will or the rules of intestate succession.

How to avoid complications

The best way to avoid complications is through estate planning. Revise your Will regularly, speak with potential executors and inform them of their roles, and make sure they know where your Will is located.

You should also speak with financial advisors - they can tell you how to use joint accounts and designated beneficiaries to your advantage. By automatically transferring funds from an account to a survivor, you can avoid the delay caused by probate and other legal procedures involved in granting control of the estate to an executor.

As the executor, you can avoid complications by carefully reviewing the Will with a legal team. You should also contact the deceased’s banks as soon as possible to inform them of the deceased’s passing.

Conclusion

Settling a bank account when a person passes is complex. That’s why it’s essential to talk to your potential executors about what you’ve planned for your estate, and to speak with your financial institutions about the rules and regulations they follow when a person passes away.

Knowledge is power, and preparation is key. Alterna Cremation hopes this article has given you the knowledge you need to be prepared.

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