Banking What Happens to a Joint Account When One of the Owners Dies? There may be income tax, estate tax, and other consequences By Julie Garber Julie Garber Julie Garber is an estate planning and taxes expert with over 25 years of experience as a lawyer and trust officer. She is a vice president at BMO Harris Wealth management and a CFP. Julie has been quoted in The New York Times, the New York Post, Consumer Reports, Insurance News Net Magazine, and many other publications. learn about our editorial policies Updated on January 30, 2022 Reviewed by Margaret James Reviewed by Margaret James Twitter Peggy James is an expert in accounting, corporate finance, and personal finance. She is a certified public accountant who owns her own accounting firm, where she serves small businesses, nonprofits, solopreneurs, freelancers, and individuals. learn about our financial review board In This Article View All In This Article How Joint Accounts Work Joint Bank Account Rules on Death Consequences When You Inherit a Joint Account The Joint Owner's Final Bills The Bottom Line Frequently Asked Questions (FAQs) Photo: The Balance / Catherine Song When a loved one dies—particularly when the death is unexpected—family members can be left scrambling for cash just to pay for the basic necessities of life. A bank account held in the deceased's "sole name" can't be touched or depleted, except through the probate process, so that money is out of reach. But "sole name" is the key term here. Many individuals hold joint bank accounts with someone else, which can help you avoid that problem. Learn what happens to a joint account when one of the owners passes away. How Does a Joint Account Work? With a joint bank account, one or more people have full access to all money contained in the account, regardless of who opens it or who makes any of the deposits. These individuals might be related, such as a parent and their adult child, or they might be spouses, but they don't have to be. You can open a joint account with your best friend or your neighbor if you want to. Joint accounts are often set up with others for estate planning purposes, so the family can easily pay co-owner's bills should an individual die or become incapacitated. Warning Each co-owner's creditors also have legal access to the funds in a joint account. It's possible that a creditor could seize the entire account if one of the co-owners defaults on a loan or another debt, although this depends to some extent on individual state laws, and the creditor must typically file a lawsuit first. Joint Bank Account Rules on Death When a joint account is created, it's usually set up as "Joint With Rights of Survivorship" (JWORS). This means that, upon the death of one account holder, the assets are transferred to the surviving account holder. Rights of Survivorship Most accounts carry automatic rights of survivorship, but it's a good idea to check with your financial institution to ensure that this is the case for your joint account. You may have to sign additional documents to indicate that this is what you want. The surviving owner would continue to have full access to the money even if the co-owner of the joint checking account were to die, as long as the account carries these rights. Note "Rights of survivorship" are sometimes called "tenants by the entirety" in some states when the account is held by spouses. Consequences When You Inherit a Joint Account While your rights to a joint account in the case of the co-owner's death may be fairly straightforward, there are several tax consequences you'll need to keep in mind. Income Tax Consequences When you take sole ownership of the account after the date of your co-owner's death, you'll become fully responsible for paying any tax that comes due on income earned by the account. This can be negligible with a basic checking or savings account, but it can be much more significant with a well-funded investment account. Any income earned by the joint account prior to your taking over sole ownership would be reported more or less the same way as before you took over the account. It would be reported on the decedent's final income tax return if they were reporting 100% of the account's income prior to their death, or you might split it if this were your arrangement before their death. Note It can complicate the tax situation if the decedent's other assets are subject to probate, or if they left a living trust. In that case, you may want to work with the executor of their estate or the trustee. Estate Tax Consequences A portion of the account will contribute to the decedent's taxable estate, even though the account itself wouldn't be subject to probate. Probate estates and taxable estates are two very different things. Probate assets are those that require some legal mechanism to pass to a living beneficiary after death, and joint accounts with rights of survivorship do not. Taxable assets include basically anything the decedent had an ownership interest in at the time of their death. You'll want to consult with the executor of the estate if the decedent left a probate estate. But as a practical matter, only very large estates are subject to estate taxes at the federal level—those worth $11.7 million or more in 2021—and only the value over that amount is subject to the tax. It's unlikely that you would have to worry about who pays estate tax associated with an inherited joint account. Important Several states, as well as the District of Columbia, have their own estate taxes as of tax year 2021, separate from the federal tax. Their value thresholds can vary considerably from the federal level. Check with a local attorney to find out whether your state is one of them and whether you have anything to worry about tax-wise at the state level. Inheritance Tax Consequences An estate tax is based on a percentage of the value of the decedent's overall estate, and it's normally payable by the estate. An inheritance tax is levied only against a specific gift or bequest, and it's payable by the person who receives the asset, not the estate. Some decedents leave instructions that their estates should pay any inheritance taxes due, in order to take the burden off the beneficiary. The good news is that there's no inheritance tax at the federal level, and only some states impose one. The laws of the state where the account owner lived at the time of their death would dictate whether their heir(s) would be required to pay inheritance tax on the account. Inheritance tax rates typically depend on how closely you were related to the decedent. Spouses typically inherit tax-free. Immediate kin pay a reduced percentage, so you would owe less if the account's co-owner had been your parent. Unrelated beneficiaries pay the highest rates. Do You Have to Pay Any of the Joint Owner's Final Bills? The answer to this question is a resounding no. The decedent's probate estate is responsible for paying off their final bills and debts. An account with rights of survivorship bypasses the probate estate and moves directly to the surviving account holder, so the money never becomes available to the estate to pay the decedent's final bills and expenses. The only exception to this rule is if the account co-owner also happened to co-sign on one or more of the debts in question. Consumer law trumps estate law in those cases, and you would be responsible for paying off those particular debts, because you agreed to do so when you and the decedent took them on. The same would be the case if your co-owner were alive but simply stopped paying on those accounts. Liability for the debts would automatically shift to you. The Bottom Line If you have a joint account, and your co-owner dies, you will likely assume full ownership of the account. That's because most accounts are automatically set up as "Joint With Rights of Ownership." If you aren't sure, you can contact your bank or financial institution to find out the status of your account. While a joint owner would likely receive full ownership of the account, it doesn't mean they'd be responsible for paying the decedent's debts. However, there may be income tax, estate tax, or inheritance tax consequences, depending on the situation. Frequently Asked Questions (FAQs) Are the assets frozen if someone on a joint bank account dies? No. Any remaining assets automatically transfer to the other accountholder, so long as the account is set up that way, which most are. Check with the financial institution if you're uncertain. Can you set up a joint bank account with non-family members? Yes. You can establish a joint account with any individual you choose, including a friend or business associate. The money is owned equally by both parties. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Federal Deposit Insurance Commission. "Joint Accounts (12 C.F.R. § 330.9)." Capital One. "Our First Bank Account." Stokes Lawrence, P.S. "Joint Tenancy Bank Accounts as Part of Estate Planning." Kiplinger. "The Problem With Joint Bank Accounts 'Just in Case'." Fidelity. "Investment Accounts: Transfer on Death." TurboTax. "Death in the Family." Internal Revenue Service (IRS). "Topic No. 403 Interest Received." Fidelity. "Settling the Estate: Probate." Internal Revenue Service (IRS). "Estate Tax." AARP. "17 States With Estate or Inheritance Taxes." TurboTax. "What Are Inheritance Taxes?" Consumer Financial Protection Bureau (CFPB). "Can I Be Responsible to Pay Off the Debts of My Deceased Spouse?"