Today I wanted to touch briefly on deposit account ownership. A deposit account is defined as a checking, savings or CD account. When you open a deposit account relationship with a financial institution the owners of that account are recorded on what’s called a Signature Card. The original signature card will indicate who the owner of the funds are, who has the right to modify the ownership, withdraw funds from the account, close the account and lastly who the funds belong to when the owner(s) passes away.
If you are the single owner of the account, that is what is referred to as a sole owned account. If you share that account with other owners that is known as what’s called a joint owned account. In most situations of joint ownership, all owners have equal rights to all funds in the account meaning that any of the owners can withdraw all of the funds at any time or even close the account without the presence of the other owner(s) in most cases.
In the event that one of the joint owners passes away, generally what’s called the Rights of Survivorship clause will be applied and all of what remains in the account automatically belongs to the surviving owner. When an account is sole owned (an account owned by one individual) and that person passes away, if they have not designated a beneficiary for their account(s), the funds will be placed on hold and will only be released to an entitled party.
The easiest release of funds from a deceased persons account happens when they have designated a beneficiary on his/her accounts while they were living. The chosen beneficiary (and there can be multiple) will appear on the signature card. This tells the bank who the funds should be released to. Releasing the funds to the beneficiary is as simple as them completing a one page form for the bank called a Letter of Instruction which is documentation for the bank on where the check needs to be sent or into what account the beneficiary would like to have the funds deposited. IF NO BENEFICIARY IS DESIGNATED on a checking, savings or CD account the ONLY way that funds will be released after all of the owners have passed away is either through a Small Estate process or a Formal Probate process. Each state has a different standard and rules for what is considered a “small estate” with different variables like the value of the estate. In Florida specifically, court involvement is required no matter which process is chosen. Obviously this can cause unnecessary additional strife if funds are needed from that account to pay for funeral arrangements or bills etc. Here’s the takeaway: Make sure that you have a beneficiary named on the signature card for any deposit accounts that you own.