Banking Matters to Consider Before and After a Loved One Dies

At some point in our lives, a loved one will pass on and we will be faced with handling their accounts at a Bank or Credit Union. Understanding Account Ownerships at Banks and Credit Unions will help you through the process.

If an account is held as an Individual, meaning only one person is on or owns the account. A bank will want to see the original death certificate, or a certified copy; they usually will take a photocopy for their records but must see the original. They also need to see the Will showing that you are the representative of the estate.

Often there isn't a Will, which means you go to your local courthouse and ask to be named the executor of the estate. That document from the courthouse along with the death certificate will usually allow you to close out accounts or transfer the funds to an estate account depending on the size of the estate.

One way a person can protect themselves and still help family to avoid probate is to name a beneficiary on the account. By naming a beneficiary, you can bypass a Will entirely. All funds in that account belong to the beneficiary at the death of the account owner. That person shows up at the bank with their ID and the death certificate.

The upside of beneficiaries: You have total control over your funds; sometimes these are called Revocable Trusts on the signature cards which means you can go in anytime and change the name of the beneficiary.

The downside is if you become incapacitated, no one has access to your funds. If you die, and have neglected to tell the beneficiary about the account the funds could be transferred to the state because it is never claimed.

You can appoint someone to have Power of Attorney, POA for short, for yourself, but more and more financial institutions will not accept general POA's. This is sometimes called an Attorney in Fact or AIF.

Many financial institutions offer their own POA that can only be used on a specific account, and you can walk in the door and cancel at any time. This lessens your risks greatly. This is a wonderful alternative if you are traveling and only need to allow someone access to your account for a short period of time.

If you think a POA might be a good alternative along with naming beneficiaries talk it over with the family members that you are concerned with early on. A POA cannot be granted if the person is mentally unsound. Power of Attorney's also become null and void at death.

By granting a POA to a family member or friend, you are entrusting all of your funds into their capable hands. Choose wisely or you may find that your funds may disappear.

Credit Unions operate a little differently sometimes, but handle matters of a deceased member and POA's in the same manner.

Account ownerships between Banks and Credit Unions are often different from each other. If you have a joint account with two signers at a bank; a husband and wife for example you can only remove one of the signers if they both agree by signing a new signature card by one of the owners, and a second card requesting the other party be removed. This second card is signed by both original account owners.

At a Credit Union, this process is quite different. Usually each account is owned by one member who can add secondary account signers. That primary member can easily remove the second signer at will on deposit accounts. The only restrictions would be if both signers had requested an account requiring two signatures for each transaction.

Changing ownerships on Investment Accounts can be more difficult in any circumstance. Investment Accounts are often located out of your state. In the case of death, the Investment Company will need to mail or fax you some forms to complete requesting the account to be closed, or altering the ownership to new owners. These documents will need to have your signature guaranteed by a Medallion stamp. Many people often confuse a Medallion Stamp with a Notary, but it is quite different.

A Notary is only required to do the best job they can in identifying the person in front of them following the requirements issued by their state. A Medallion Guarantee is issued only by a Financial Institution. A Financial Institution will require that you have an account with them before they will authorize the use of a Medallion Guarantee Stamp.

At a Bank or Credit Union, only the Manager or Assistant Manager is authorized to use the Medallion Stamp. The reason for these extra steps is the fact that the Financial Institution will be required to cover any losses due to fraud if the signature is false.

Similar to a Bank or Credit Union, in the case of a death an Investment Company will also need to see the original death certificate as well as the Will stating that you are the executor of the estate.

Again, this is a general overview, and some companies will vary in their requirement. One thing to keep in mind, if there is a death in your family, don't feel that you have to rush in to change accounts that first week. Financial Institutions of all kinds understand that it may take a little time to gather your emotions back together as well as the appropriate paperwork.

If possible, it is best to try to close out the accounts or change ownerships before the end of the tax year, which will also make your life easier as you file those final tax returns.