Bank Account Ownership & Beneficiary Designations

Having your bank accounts and beneficiary designations titled correctly is extremely important. By correctly aligning your bank accounts and beneficiary designations with your estate plan you are ensuring that all your financial accounts will be protected and shielded from having to go through probate. However, there are many people who have common misconceptions or questions about bank account ownership and beneficiary designations. This article will hopefully provide clarity into those misconceptions and provide you with more information regarding bank account ownership and beneficiary designations.

Online Access is not the same as Account Ownership.

Many people often think that having online access to a bank account equates to account ownership, however this is not true as online access does not mean that you have actual ownership to your loved one’s bank account. This means that after your loved one has passed you will not be able to physically go into the bank and access the bank account. In the digital age we live in today, there are many ways to “access” a bank account. Often an elderly person will have a younger person in their family start assisting them with their banking by giving them the username and password to their online banking account. However, when this person passes away and the family tries to access the same account, they previously had access to they are denied and unsure of what to do.

Just because you have online access to your loved one’s bank account does not mean you have ownership rights to their account. This can create a multitude of issues after your loved one has passed away. If you have been accessing your loved one’ s bank account online but cannot after they have passed because they were the only one with actual ownership to their account, then you may be required to open a probate estate here in North Carolina.

How can you prevent this?

By correctly titling the ownership on your bank account or by putting a beneficiary designation you can avoid the probate process almost entirely. There are multiple ways you can title a bank account. Let’s discuss a few of the most common options:

Joint with Rights of Survivorship

When there are two or more people listed on a bank account and the signature card display the title “joint with rights of survivorship,” or “JTWROS” this means that upon the death of one person on the bank account, the bank account ownership will automatically vest to the other’s listed on that account, leaving no ambiguity as to who has ownership and access to the bank account.

Joint with rights of survivorship is the most secure way to ensure that there will be no accessibility issues after you have passed. However, a word of caution – whoever is listed on your account with joint rights of survivorship, will automatically become the sole owner of the funds in that account after you pass. Therefore, if you want that money to be distributed according to an estate plan you have in place or you do not want one specific person to receive all that money, then you are better off adding them as a beneficiary to your account.

Tenants in Common:

When there are two or more people listed on a bank account as tenants in common, it means that each person owns a share of that bank account. It may look like a joint account because each person will have access to the account, however there will be no survivorship language designated, therefore when one person on the account passes, the account will not automatically pass to the surviving account owner. The deceased account owner’s heir’s or beneficiaries under their Will if they had one will now own the same percentage that the deceased owner did.

Beneficiary Designations:

Beneficiary Designations are a great tool to use to help avoid probate and make sure your financial assets are protected after you pass. At almost all financial institutions you can add a beneficiary designation to your bank account, by listing who you would like your assets to go to after you have passed. Many common beneficiary designations are known as Pay on Death (POD) or Transfer on Death (TOD). Beneficiary Designation ensures that after you have passed your financial account will automatically transfer or pay out to the person who you have named on your beneficiary designation form. This can be a great way to divide assets among children, or grandchildren, or to make sure that there is some money available to your family members after you have passed to help with unexpected costs associated with your passing.

However, if you have a Revocable or Irrevocable Trust set up it is imperative that you make sure your trust is listed as the beneficiary on your bank accounts as that will allow those financial assets to flow into your trust upon your death. To learn more about funding your Trust, please see this article.