Significant facts about bank accounts in USA

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It is easy to open an account and save money but there are certain things you need to know about keeping your money safe. Be prepared for those unexpected situations. When you open any bank account don't forget to add a beneficiary or POD. Otherwise the money will be remitted to the state  upon death of an account owner. Though the account owner has a family and heirs they have no right to inherit the money if they are not added as beneficiaries. Recently, learn't first hand information from my bank and here it is for you.
 If you are living in America, it is very easy to open a bank account. All you need is two IDs-they are a driver's license, and a passport\Social security number\student ID\\debit card\check card from another bank. Some banks, like Suntrust, allow you to open a checking account without a minimum balance.

Why should you add a beneficiary when you open a bank account?
Beneficiary is a person who is eligible to receive all the money in the account upon the death of the owner. Beneficiary can access your account if given rights and can check the balance and the transactions. Beneficiary can deposit the checks in the account. Having a beneficiary added to the bank account makes it easy in case any unfortunate incident occurs like expiry of the account owner. In such case the beneficiary has to submit the death certificate and will be able to withdraw money. This simple step saves the family all the hassle.
What is POD?
Payable on death(POD)  is a person who would receive the balance in the account upon demise of the account owner. But he would never know anything about your finances or transactions. Person in POD will be notified in case of death of an account holder and will be gifted with all the balance as stated in your POD application. "Payable on Death bank accounts are often called the “poor man’s trust” because they accomplish the same goals as a lawyer-drawn trust, but for free".
Read more about PayOnDeath account.
What if you haven't added a beneficiary but you have a will?
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If you have a will then money will be distributed according to the court ruling. The heir should first go to the court in the state you lived and get the 'court order' that states he\she is eligible to receive the balance amount. In order to draw the money, the heir needs to submit 3 documents of proof to the bank, they are- the court order, the will, and the death certificate.
What is an inactive account and what happens to it?
If you do not deposit, withdraw, or do any ATM transactions for 1 year then that account will be considered inactive by your bank. After 1 year of inactivity the bank encodes the account as 'dormant'. (The time period varies from bank to bank). All the money from the dormant account will be remitted to the state. That means, none of your descendants will be able to enjoy your money and it will  be given away to the state government in USA. This happens just because we were not careful about our own hard earned money.

What if, you neither have a beneficiary\POD nor a Will?
In such case, an heir cannot provide a proof that he inherits the property.The inactivity on the account leads the bank to mark the account as dormant. All the hard-earned money from the dormant account goes to the state government in which the account was created initially.
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Dormant account: States like Alabama, DC and Maryland will wait for 3 years only after the account has been marked dormant. Later, the money will be remitted to the state. Whereas, all the other states wait for 5 years to take money from an unclaimed account. Interest is not paid on dormant accounts and a non-refundable monthly dormant fee will be charged for the maintenance of the account.

Golden advice: "Add beneficiary or POD on all your bank accounts. Safe your assets immediately by preparing a will and a trust".
Find helpful links to prepare will and trust in my previous post Will and Trust.

The above information varies from state to state and also depends on your bank. Contact your bank and read your state laws for applicable rules and restrictions.

I dedicate this post to my friend Geetha. In my first year in US, she gave tips that one needs to live wisely in US. 


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