The question of what happens to money left in a joint bank account when one person dies is decided by the formal title of the account and the relationship between the two parties. Several factors must be considered when opening a joint bank account, including the distribution or disbursement of funds remaining after one owner's death.
Joint Bank Accounts
Sharing a bank account with another person is not uncommon, particularly in the case of married couples, business partners, or parents and children. Typically, joint bank accounts are either checking or savings, money markets or CDs. Opening a joint bank account allows both parties to make deposits and withdrawals, use debit cards, write and sign checks, and initiate wire transfers. Neither of the individuals has more or less authority to conduct banking business than the other.
Most joint bank accounts are opened and titled as "joint tenancy" accounts. This arrangement indicates that, upon the death of one of the parties, any money still held within the account will immediately pass to the other. The deceased party's heirs have no claim to any of the money in the account due to the rights of survivorship of the living co-owner, even if in his will he indicated a desire to leave the money to another person.
Tenancy in Common
You may instruct the bank to structure and title your joint bank account as "tenancy in common" as opposed to "joint tenancy." This arrangement indicates that, upon one owner's death, his portion of the money remaining in the account becomes the property of his heirs. Money in a joint bank account after one owner dies must first pass through probate as an asset of the deceased party's estate and may be subject to inheritance or estate taxes.
Tenancy by the Entirety
Married couples often open joint bank accounts under the title of "tenancy by the entirety." This arrangement is very similar to joint tenancy in that, upon the death of one spouse, any remaining money becomes the sole property of the survivor. The significant difference with tenancy by the entirety is that the married couple conducts banking business as a single entity and creditors of the deceased spouse have no claim to any portion of the money still held within the joint bank account.
- Bank of America: Deposit Agreement and Disclosures
- Free Legal Dictionary: Joint Tenancy
- Money Crashers; Considerations when Opening a Joint Bank Account with a Spouse; Chris Bibey
- Consumer Financial Protection Bureau. "I Have a Joint Checking Account. The Other Person Closed the Account Without Telling Me. Is That Allowed?" Accessed Feb. 26, 2020.
- Consumer Financial Protection Bureau. "I Have a Joint Account With Someone Who Died. What Happens Now?" Accessed Feb. 26, 2020.
- Nolo. "Bank Levies on Joint Accounts (Spouse)." Accessed Feb. 26, 2020.
Gregory Gambone is senior vice president of a small New Jersey insurance brokerage. His expertise is insurance and employee benefits. He has been writing since 1997. Gambone released his first book, "Financial Planning Basics," in 2007 and continues to work on his next industry publication. He earned a Bachelor of Science in psychology from Fairleigh Dickinson University.