How are Bank Accounts Inherited?

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Bank accountsBank accounts do not have to pass through probate.

With most actions in life, there is typically an easy and a hard way to accomplish the same task.

Although one can hand wash every plate, bowl, fork, knife, and spoon after dinner, it is more efficient to simply load and run a dishwasher.

Sometimes easy is better, and other times it is not.

For example, before loading them in the dishwasher, I still give each item a quick scrub and rinse.

I digress.

According to a recent Investopedia article titled “What Happens to Your Bank Account After Death?,” a bank account can be transferred multiple ways when a person dies.

These include using a pay-on-death (POD) or transfer-on-death (TOD) beneficiary designations or simply allowing the account to be distributed through probate.

The POD or TOD designation is arranged directly with the your banking institution.


The individual you designate as your beneficiary will not have access to these funds until your death.

If your original choice for beneficiary should die before you or fall out of favor, you can update the beneficiary name while you are alive.

After receiving notification of the death of an account owner, banks typically freeze the funds.

This step is taken to prevent fraudulent activity.

By making your bank accounts POD or TOD, you can speed up the timeline for heirs to gain access to these funds.

With either designation, the beneficiary needs only to provide the bank with personal identification and your death certificate to gain assume ownership of the account.

This is not the same as adding another owner to your account.

Commonly, joint account ownership is accomplished through joint tenants with rights of survivorship (JTWROS).

The assets held in JTWROS automatically become the property of the surviving owner or owners after the death of the other account holder.

Although adding heirs as additional account holders with the bank accounts can also simplify asset access and transfer when you die, it can have intended negative consequences while you are alive.

How so?

Unintended consequences of JTWROS include possible gift taxes, relinquished control over what withdrawals can be made, jeopardized qualifications for government programs, and potential creditor claims.


If you choose to take no direct action on your bank accounts prior to your death, these accounts will be included in your probate estate.

Consequently, they will pass through probate according to the directions in your last will and testament or according to the intestacy laws of the state if you died without an estate plan.

Creditors will be paid prior to the distribution of assets to your heirs.

All that noted, a Small Estate Affidavits may be available to avoid probate if the assets subject to probate do not include real estate or otherwise exceed a certain total value.

The Small Estate Affidavits option is available in Missouri for estates not exceeding $40,000.

In Kansas, that threshold was just increased on July 1, 2023, from $40,000 to $75,000, and the Kansas Judicial Council even provides a fill-in Small Estates Affidavit form.

Teaching point?

For those whose assets consist simply of bank accounts, POD or TOD accounts can be an easy way to transfer ownership and bypass probate.

Reference: Investopedia (June 13, 2023) “What Happens to Your Bank Account After Death?”

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