Deceased estates – what happens to a bank account if someone dies?

DARREN MASTERS
14 October 2021
When you’ve just lost someone you care about, financial arrangements can be the furthest thing from your mind.

But knowing what needs to happen with a loved one’s bank accounts and other financial products can make a difficult time that little bit easier.

Who should you notify first about finances when a loved one dies?

It’s important to contact your loved one’s financial institution(s) as early as possible, to let them know what has happened. Most financial institutions have teams and processes in place to support you when a loved one passes away. You’ll likely need to provide information like the person’s date of birth, address, and other ways of identifying them. In some cases, you may need to provide a copy of the death certificate and complete a ‘notice of death of customer’ or similarly named form.

To ensure your loved one’s estate is protected, a financial institution will then typically prevent further transactions from accounts where the deceased person was the sole account holder. However, you may be able to request that specific existing payments continue, or arrange assistance with paying for funeral expenses if needed. Transactions from joint accounts should be able to continue as normal.

After a loved one’s death, you might also think about getting in contact with your solicitor who can support you with legal aspects of the estate.

How do financial institutions handle a deceased estate?

In this context, ‘estate’ is the term used to describe all of a deceased person’s assets and possessions. How an individual wants their estate to be handled or distributed after their death is usually outlined in their will. A solicitor usually assists in writing a will, and an ‘executor’ is nominated to carry out the instructions it contains.

Banks and other financial institutions have different processes about how they handle a deceased estate. But once an institution has assessed the circumstances, they should let you know what specific documents you need to provide.

What happens to bank accounts when someone dies?

There are typically two ways the process can work, depending on how much money is in your loved one’s bank account. Each financial institution has its own ‘low-value cap’ where it can pay out the bank account without requiring probate or letters of administration. For example, Great Southern Bank sets the cap at $15,000, while for other institutions it can be as high as $50,000.

1. Low-value bank accounts

Once certified copies of the death certificate and will are provided, as well as proof of ID for anyone who will receive money from the deceased estate, the money will be distributed by the financial institution. It’s often simply paid to the executor of the estate who then distributes funds to any other beneficiaries according to the instructions in the will.

If there’s no valid will in place, the financial institution may need additional documents before proceeding, such as a marriage certificate or birth certificate to prove you are the deceased’s next of kin.

Once the funds are distributed, any accounts where the deceased person was the sole account holder will be finalised and closed. The executor will be notified when the account is closed.

If the deceased person was a joint account holder, they will be removed from those accounts and the remaining person will become the sole owner of the account. The account owner will then be able to use the account as normal.

2. Higher-value bank accounts

This process is similar, but for larger estates you will also need to provide a certified copy of a ‘grant of probate’, which is a court document authorising the executor to carry out the instructions in the deceased person’s will. If the person died without a valid will in place, then ‘Letters of Administration’ are granted instead to the administrator of the estate. Your solicitor should be able to assist with that process.

Without a grant of probate, the financial institution may not be able to close the deceased person’s bank accounts and release the funds.

What happens to a deceased person’s loans?

Any loans or debt in the deceased person’s name would need to be repaid using money in their estate. If it’s a loan or credit card in joint names, the surviving borrower can typically choose to continue repayments, negotiate different terms or pay out the debt.

If life insurance or loan repayment insurance such as mortgage protection insurance was in place, the insurance provider may pay out the balance in part or in full.

Other financial aspects to think about when someone passes away

Life insurance

If your loved one had a life insurance policy in place, you should think about contacting the insurer as soon as possible after they pass away. If they held their life insurance via their superannuation, you may need to contact their super fund. Either way, the insurer will then normally provide you with a claim form to be completed, signed and returned.

To process the claim, the life insurer will also usually need:

  • The policy document and policy schedule, certificate of insurance or policy number
  • Proof of claim eligibility (for example, a certified copy of the death certificate)

Home, car, health, landlord and other insurance

If it’s a joint policy, most insurers will ask for a certified copy of the death certificate in order to remove the deceased person’s name from the policy. For policies where your family member or friend was the only person insured, the policy would stay in their estate until cancelled by a person with the authority to do so (for example, the executor of their will).

Keeping insurance in place until the insured assets are sold will help ensure the assets remain protected if something happens. If policy premiums are paid from a bank account that’s solely in the deceased person’s name, and you wanted to continue the policy in the deceased’s name rather than transferring to your own, the executor would usually need to ask the bank to continue those payments.

Superannuation

Because there are specific laws covering superannuation, any funds a person has saved in their super do not automatically become part of their estate when they die.

Specific instructions about who should receive the money may have been given to the trustee of the super fund in advance, through a Death Benefit Nomination.

If a valid Binding Death Nomination is in place, the superannuation fund trustee will pay the superannuation benefit and any life insurance held in super to the beneficiary or beneficiaries listed in the nomination. Depending on who the beneficiaries are, and what rules apply, the benefit may be paid either as a lump sum or a regular payment.

If no valid Binding Death Nomination is in place, the money will be distributed according to the rules of the super fund and the relevant superannuation laws. In this case, the trustee will usually prioritise the spouse of the deceased and any young children.

It can be a good idea to speak to a financial planner, to help you navigate these processes and for advice on what to do if you receive a payment from a super fund.

The importance of planning ahead

Your loved one’s financial institution should do all they can to help you deal with their finances after they pass away. But the process is usually much more straightforward if the person puts clear instructions in place in advance, before they pass.

It’s about being prepared and having open conversations with your partner, children or other loved ones now, so that when it comes time to finalising your estate, it’s a seamless process for them.

Checklist – who to contact about finances when a loved one passes away

As soon as possible…

  • Banks or credit unions
  • Financial advisor
  • Insurance companies (including life insurance)
  • Solicitor
  • Superannuation fund

As soon as you’re ready…

  • Australian Government Department of Human Services (for Centrelink, Medicare, Child Support and other social security payments)
  • Australian Taxation Office
  • Local council
  • Local post office (for incoming mail)
  • Utility and telecommunication providers (electricity, gas, phone, etc.)
  • Vehicle registration and licensing authorities

Documents you might need:

  • A certified copy of the death certificate
  • A certified copy of deceased person’s will
  • A certified copy of the Grant of Probate (if needed for larger estates), or the Letters of Administration if there is no will
  • Insurance policy documents
  • Proof of your identity and your relationship to the deceased person

The Australian Death Notification Service

Another option you may consider is the Australian Death Notification Service (ADNS). The ADNS is a cross-jurisdictional project supported by all states and territories and delivered across Australia by the NSW Registry of Births Deaths & Marriages (BDM) and NSW Department of Customer Service (DCS).

The ADNS enables customers to notify multiple organisations of the death of someone close to them in one digital interaction. It is intended to reduce the number of interactions and conversations a person needs to have in order to notify all the relevant organisations of a loved one’s death.

The ADNS utilises the Australian Death Check (ADC), which is a combined national database of registered deaths from every Australian state and territory’s Registry of Births, Deaths and Marriages.

 

Please note this is only intended as a general guide in relation to issues you may want to consider when dealing with a deceased estate. It is not intended to be an exhaustive list of all relevant issues and does not take into account your personal needs and financial circumstances. You should consider your own particular circumstances, and obtain independent expert advice where needed, before proceeding. Examples quoted are indicative only and intended for illustrative purposes.

Cover image source: fizkes/Shutterstock.com

About Darren Masters

Darren is a financial wellbeing content writer with Great Southern Bank. He holds two business degrees in Management and Advertising at QUT, and has over 20 years’ customer and marketing communications experience working with some of Australia’s leading financial institutions, from national bank and super funds brands, to regional, member-owned credit unions.

 


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This content was reviewed by Sub Editor Tom Letts and Finance and Lifestyle Editor Shay Waraker as part of our fact-checking process.

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