What Happens to a Person’s Money When They Pass Away?

May 23, 2024 2 min read

When a loved one dies, the reality is that in addition to dealing with loss, you may have work to do. There are the logistical tasks of planning funeral arrangements and memorial services, but you also may need to take action regarding their finances. Here’s what to know.

What Happens When There’s Debt Left Behind?

What happens to debt when someone dies? In most cases, it doesn’t just go away. According to the Consumer Financial Protection Bureau, money or property left in the estate goes toward repaying the debt. 

If there aren’t any assets in the estate, the debt might not need to be paid. But you could be responsible for it if you:

  • Co-signed on a loan.
  • Are a joint account holder (which is different from an authorized user) on a credit card.
  • Are required by state law to pay a debt as a spouse.

If you’re not sure if you’re responsible for debt after someone dies, it’s a good idea to contact a lawyer.

Where Does the Money Go After Someone Passes?

What happens to bank accounts when somebody dies? For joint accounts, most of the time, the other account holders can keep using the money in the account normally.

If it’s not a joint account, but the person who died named a beneficiary or payable-on-death (POD) designation for the bank account, the process should be straightforward. The money goes to the person or people named as beneficiaries. With some types of accounts, like retirement savings accounts, annuities and life insurance, the owner is required to name a beneficiary.

If there are accounts without beneficiaries, the money in them goes to the person’s estate and gets distributed according to what they stated in their will. If they don’t have a will, the money is distributed according to state law. Most of the time, the money goes to the person’s surviving spouse and children.

To start the process, you’ll need to inform the bank that the person has passed away. The bank will probably require a copy of the death certificate, the person’s Social Security number and possibly other documents.

How long do banks take to release money after probate? That depends. If everything is in order, it could take just a few weeks. But if there are any disputes during the probate process, it could take years to resolve.

How Can You Organize Accounts and Assets Ahead of Time?

There are steps you can take before the death of a loved one to help make the process go more smoothly and ensure their wishes are carried out:

  • Ask them to add a trusted person to their accounts as a joint account holder. That way, that person can access the money.
  • Ask them if they have named beneficiaries on all of their accounts. They might need to ask the bank to add a beneficiary and fill out a POD designation form.
  • Make sure they have an up-to-date list of all of their accounts. That way, nothing goes unnoticed at the time of their death. 
  • If they have multiple accounts that are similar, like spending or savings accounts at different banks, suggest that they consolidate them.

Get With Financial Advice

A Farm Bureau financial advisor can help you with estate planning to ensure that everything is organized properly so you can focus on the people who matter most.

Want to learn more?

Contact a local FBFS agent or advisor for answers personalized to you.