Whether a bank account must go through probate depends on how the account was held – jointly or in the decedent’s sole name. Like real property, bank accounts can be owned in many ways. If a bank account is held jointly between two or more parties, there is usually a right of survivorship. This means that if two people are co-owners of an account, and one owner dies, the surviving owner inherits the account, without the need for probate.
Similarly, if an account is held in an individual’s sole name, but has a beneficiary designated, the beneficiary can go to the bank and complete a claim form to inherit the account without any Court intervention upon the account holder’s death. However, if the account is held in an individual’s sole name without a co-owner or designated beneficiary, the funds in the bank account will pass through the decedent’s probate estate.
For most families leaving assets to their spouses, children or siblings, probate is not a concern. It does cause some delay since the Executor must wait for the Court’s approval before they can marshal the assets of the estate, and there are legal and court filing fees associated with a probate proceeding.
However, if you are disinheriting a family member, or do not have any close family members, probate can cause significant delay and cost. In the case of disinheriting a family member, the Executor may have to obtain the disinherited person’s consent or defend the Will against objections. This process known as a Will Contest can drag on for years and cost tens of thousands of dollars in legal fees. Similarly, if you do not have any close relatives, the Executor of your Will must hire a genealogist to find your next of kin and serve them with notice of the probate proceeding – causing additional cost and delay.
If you have factors in your estate plan which would make probate problematic, naming co-owners or beneficiaries on your bank accounts is one way to avoid issues after you are deceased. Another way is to set up a living trust. As always, consult with an estate planning lawyer to discuss options to ensure the administration of your estate is as seamless as possible.