What Happens to Bank Accounts When Someone Dies in Canada?

When someone dies in Canada, their bank accounts are typically frozen to protect their assets and prevent unauthorized access. This article explains the process, including the role of the executor or estate administrator, the handling of different types of accounts, and what joint account holders can do. It also highlights the importance of notifying the bank promptly and seeking professional guidance to navigate estate laws and procedures.

Understanding the Bank Account Freeze

When a person dies in Canada, their bank accounts are typically frozen by the financial institution. This means:

• No withdrawals or transfers: No one, not even family members or joint account holders, can withdraw or transfer funds from the deceased's account.
• Automatic payments may cease: Standing orders like rent, utility payments, or subscriptions linked to the account might be halted.
• Incoming funds may be returned: Any pending deposits, such as government benefits or paychecks, might be returned to the sender.

The purpose of the freeze is to protect the deceased's assets and prevent unauthorized access until the legal processes for handling the estate are initiated.

The Role of the Executor or Estate Administrator

The executor (if there's a will) or the estate administrator (if there's no will) is the person legally responsible for managing the deceased's estate, including their bank accounts. To gain control of the accounts, they need to provide the bank with:

• Death Certificate: An official copy as proof of death.
• Grant of Probate or Letters of Administration: This document issued by the court officially authorizes the executor or administrator to manage the deceased's estate.
• Identification: The executor or administrator's own government-issued identification.

Types of Bank Accounts and What Happens

The process for handling a deceased's bank account varies slightly depending on the type of account:

• Sole Accounts: Bank accounts owned solely by the deceased become part of their estate. The executor or administrator will be responsible for using the funds to pay any outstanding debts, taxes, and specific bequests (if named in a will). Remaining funds are distributed to beneficiaries according to the will or intestate succession laws (if no will exists).
• Joint Accounts: Generally, funds in joint accounts with the right of survivorship pass directly to the surviving joint account holder. They gain full ownership bypassing the probate process. However, there might be exceptions (such as if the deceased's will challenges the survivorship principle or if creditors have claims against the estate).
• Trust Accounts: Funds in trust accounts are governed by the terms of the trust. The trustee is responsible for managing the funds according to the trust instructions. These accounts typically avoid probate.

What Can Joint Account Holders Do Before Death

If you are a joint account holder with the deceased, here's what to keep in mind:

• Immediate Access: You may still have temporary access to funds for essential expenses like funeral costs or urgent bills. Contact the bank to discuss your situation.
• Potential Challenges: Even with the right of survivorship, you may face challenges if there are outstanding debts against the deceased's estate, disputes arise, or the will contests the ownership of funds in the joint account.
• Seek Guidance: Consult with an estate lawyer to understand your rights and potential obligations if you're a joint account holder.

Additional Considerations

• Notifying the Bank: Contact the financial institution as soon as possible following the death. The bank can explain the specific requirements and procedures involved.
• Small Estates: Some provinces have simplified procedures for small estates below a certain threshold to release funds without full probate.
• Debts and Taxes: The deceased's funds might be used to pay outstanding debts or taxes. If the estate doesn't have enough funds, creditors might not be fully repaid.
• Beneficiary Designations: Accounts like Registered Retirement Savings Plans (RRSPs) or Tax-Free Savings Accounts (TFSAs) can have designated beneficiaries outside of the will. These funds pass directly to the named beneficiary.

Important Note:

Estate laws and procedures can vary slightly between provinces and territories in Canada. It's highly advisable to consult with an estate lawyer to ensure you understand the specific process and obligations in your jurisdiction.

Resources

• Canada Revenue Agency - Death-related Information: (https://www.canada.ca/en/revenue-agency/services/tax/individuals/life-events/doing-taxes-someone-died.html)
• Provincial Government Websites: Search for "estate law" or "probate" on your provincial government website (e.g., Ontario, Alberta, British Columbia) for specific information and forms.

Seeking Professional Help

Managing a loved one's estate can be complex. Don't hesitate to seek professional guidance from an estate lawyer and the bank's estate specialists. Their expertise can help ensure a smooth and legally compliant process.