What happens to a bank account after death?

When someone passes away, their estate will be divided up according to their will. But if there’s no will, how everything will be divided up depends on what province or territory you’re in.

What happens to your bank account when you die?

When someone dies, their bank accounts are closed. The executor of the estate will be in charge of dividing the estate up according to the will, which is a legally binding document that outlines who receives the deceased’s assets following their death. If there is no will, the estate’s administrator will divide up the assets according to the provincial or territorial succession laws from where the deceased lived.

In most cases, a majority or even all of the money will go to their spouse, and the remainder will be divided up among their children. Any credit card debt or personal loan debt will be paid from the deceased’s bank accounts before the account administrator takes control of any assets.

Payable on death accounts in Canada

A bank account where a beneficiary is named is called a payable on death (POD) account. These accounts are useful to avoid probate and are common in the US. In Canada, however, only registered accounts like TFSAs and RRSPs can have named beneficiaries. Having a join bank account is the best way to avoid probate for a regular, non-registered bank account.

Transfer on death (TOD) accounts work similarly for investments held in registered accounts. When the TOD account holder dies, the account passes to the named beneficiary.

What happens to a bank account when someone dies without a will in Canada?

If someone dies without a will, assets and property are passed by succession to their heirs. Succession laws depend on the province or territory the deceased lived, and a court appoints an administrator who divides up the assets. In most cases, a majority, or even all of the money, goes to their spouse, and the remainder is divided up among their children.

What happens to a joint account when someone dies?

If the deceased had a joint-account with someone else, such as a spouse, the account may stay open and accessible by the surviving account owner.

Generally, that does not hold true if the account is jointly-held by an adult child when a parent dies. In that case, legislation commonly dictates that the child will no longer have access to the parent’s account unless “right-of-survivorship” had been clearly established by the parent in writing. Note that there is no right-of-survivorship allowance in Quebec.

Required documents

Before the deceased’s estate can be settled and their bank accounts closed, the financial institution needs documents showing proof of death and who is responsible for handling the state. In most cases that will include:

• Death certificate
• A copy of the will
• Proof of executor status

If the deceased has not left a will, the provincial or territorial courts will appoint an estate administrator. At that point, a letter from the probate court naming the estate’s administrator and a death certificate can suffice for the bank.

Contact the financial institution to start the process of settling the deceased’s bank accounts. The financial institution will provide a information advising of the next steps once they have received notice of death.

How do I claim a deceased person’s bank account?

There are a few simple steps to follow to claim a deceased person’s bank account if you’re the payable on death beneficiary:

1. Visit or call the bank to start the claims process.
2. Make sure you have your government-issued ID and a copy of the death certificate on hand. You’ll either show these, in-person, at the bank or submit digital copies.
3. Fill out the bank’s paperwork, which was pre-signed by the deceased owner and states that you shall inherit the account.
4. Withdraw the funds or move the money into a new account at the same bank.

What happens if I inherited a GIC?

If you inherit a GIC, there are three ways you can handle it:

• Leave it alone until maturity. If you don’t need the money right away, you could leave the account alone and let it keep earning interest until it expires.
• Withdraw the funds. Although GICs are known for having early withdrawal penalties, these usually don’t apply when the account owner dies, so you can withdraw the funds for free.
• Transfer the GIC into your name. If rates have gone up since the deceased opened the account, you can transfer it into a new GIC and take advantage of the higher rate. Again, this may make sense if you don’t need the money right away.

How to avoid complications

Talk to an estate planning professional to minimize issues that can arise if you become unable to care for yourself. Consider the following when you meet with a professional:

1. Add a power-of-attorney (POA). There are many different types of POAs. But a durable POA has the broadest powers and makes decisions about your health, finances and legal affairs while you’re alive.
2. Create a trust account. There are many different types of trusts, so it’s important to speak with a professional about the best one for your situation.
3. Spell out your wishes. Once your trust is established, layout how you want to distribute your bank account upon death.

Who is most likely to be researching what happens to a bank account when you die?

Finder data suggests that women aged 65+ are most likely to be researching this topic.

Bottom line

If you have a joint-bank account, in many cases the surviving member will be able to withdraw money from the account after the owner dies. If not, the bank account will be closed and its balance will be divided up according to the deceased’s will or the succession laws of the province or territory.

If you’re thinking about getting your affairs in order, the next step may be to consider taking out life insurance.

Frequently asked questions

• What happens to credit card debt when you die?

  If the deceased has credit card debt or personal loan debt, the balance of these debts will be paid from the deceased’s bank accounts before the funds are released.

• What happens to GICs when you die?

  If the GIC has a beneficiary, ownership will transfer to that person. If not, the GIC will be handled as part of the estate. It may also be possible to include someone as a joint-owner of the GIC, which will prevent it from going through the probate process with the rest of the estate.

• How long does it take for an account to be settled and closed after death?

  There's no set amount of time. Depending on how the person's estate is being handled, how much was decided in writing beforehand and if there are any disagreements, it could take weeks or even years. Contact your financial institution for more information.

• Will my money be taxed after I die?

  Canada does not have an inheritance tax. After someone dies, however, you will have to ensure you remit the remaining income tax owing, including any income incurred from selling portions of the estate, before anything is distributed to the beneficiaries. You'll also need to pay any probate fees.

• Can I open a payable on death account in Canada?

  Yes, but a payable on death (POD) bank account must be registered (like a TFSA or RRSP). That's because only registered accounts let you name a beneficiary to inherit the account when you die. You can similarly open a transfer on death (TOD) account for investments that you want to pass on to someone else after you die.

Written by

Dawn Daniels

Publisher

Dawn Daniels is a freelance content strategist and SEO manager and former editor at Finder, specializing in investments and lending. Dawn has edited more than 50 published books, including personal finance titles that have become best sellers on the Amazon Top 100. She holds a BA in English language and literature from Cornell College. See full bio

Co-written by

Jaclyn Hurst

Associate Publisher, Investments

Jaclyn Hurst was an associate publisher at Finder. She has a Bachelor’s degree in Business from Redeemer University and a University Certificate in Management Foundations from Athabasca University. She’s as passionate about business and finance as she is about the great Canadian outdoors, organic Sumatra coffee and music. See full bio