Answers to Common Questions and Situations

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What Happens to 401(k) When You Die? How Are Financial Assets Handled In Probate?

what happens to your retirement money when you dieWhen someone passes away, it is common for family members to ask questions about their loved one’s financial assets. They might wonder: What to do with their bank accounts? Can someone withdraw from these accounts? What happens to their 401(k)? Who will deal with the financial matters? Who is responsible for my loved one’s debts?

We will answer some of these common questions and offer guidance to help you confidently manage financial assets.

What Happens to Financial Assets During the Probate Process?

During probate, the deceased’s financial assets are gathered and assessed for their worth. These assets can include:

  • Bank accounts.
  • Business interests.
  • Investment portfolios.
  • Retirement accounts (IRA, 401(k), pension).
  • Other items of value.

After the estate has been evaluated, any outstanding debts and property taxes owed by the deceased are paid off using the assets in the estate. Once creditors have been satisfied, the personal representative is then able to distribute any remaining assets to beneficiaries or heirs in accordance with the will or intestate law.

It is important to remember that not all assets are subject to probate. Assets jointly owned with a designated beneficiary or that have a transfer-on-death or payable-on-death designation may not need to go through the probate process.

Probate Order of Distribution

In Georgia, there is the rule that creditors are paid before heirs and beneficiaries. There is a system that dictates which debts are paid first and in which order. The following order needs to be respected:

  1. Years Support.
  2.  Funeral expenses.
  3.  Administration fees.
  4.  Expenses of final illness.
  5.  Pay income taxes, estate tax, and other taxes.
  6.  Secured Creditors.
  7.  Unsecured Creditors.
  8.  Heirs/Beneficiaries.

Who Has the Authority to Access the Deceased’s Financial Assets?

Access to a deceased person’s financial assets, including retirement accounts, will depend on how the assets are titled (probate or non-probate). Financial institutions do not allow anyone to touch the deceased’s bank accounts.

Probate assets

what happens to your 401k when you dieWhen a will exists, the executor named in it shall have the authority to access and handle the deceased’s financial assets once they have been appointed by the Probate Court.

If no will exists, the Probate Court must appoint an administrator to access the financial assets and oversee the probate estate.

The probate process in Georgia consists of three phases: appointment, administration, and distribution and discharge. During the initial stage, known as the appointment phase, the Probate Court assigns a personal representative to handle the estate assets.

Are All Types of Financial Assets Subject to Probate? Does a 401(k) Go Through Probate?

Not all financial assets are subject to probate in Georgia. If a 401(k) or retirement account has a designated beneficiary, usually it is not subject to probate.

Non-probate Assets

Assets that have a designated beneficiary, such as a life insurance policy and a retirement account, are typically considered non-probate assets. This means that the named beneficiary has sole access to the funds and they may not be subject to the probate process. It’s worth noting that these assets may pass directly to the named beneficiary, regardless of what the will or intestate law says.

However, assets that were solely owned by the deceased person, like bank accounts and real estate, are generally subject to probate. It’s important to review all financial assets and their ownership structure to determine which are subject to probate and which are not.

It is best to speak with an experienced attorney to ensure that all assets are properly handled and accounted for during probate.

Who Determines the Ownership of Financial Assets After the Owner’s Death?

When a person passes away, the Probate Court will determine who owns the financial assets they left behind.

If there is a valid will, the assets will be distributed according to its terms.

If there is no will, or if the will is invalid, state law will decide how the assets will be distributed.

Once the probate process is complete, the ownership of the financial assets will typically transfer to the deceased’s beneficiaries or heirs.

The Role of Personal Representative in Handling Financial Assets During Probate

The personal representative (i.e., the administrator or executor) is responsible for the deceased person’s financial assets during the probate process.

Their role includes:

  • Identifying and valuing all assets.
  • Keeping detailed records of all financial estate-related transactions.
  • Identifying and paying any outstanding debts or taxes owed by the deceased.
  • Satisfying the creditors.
  • Distributing assets to the beneficiaries or heirs according to the will or intestate law.

How Are Outstanding Debts and Bills of the Deceased Handled in Probate?

probate financial assetsIn Georgia, the executor or administrator must identify and pay all outstanding debts out of the deceased’s estate assets. These obligations may include credit card balances, funeral expenses, medical bills, or mortgages.

If there is not enough money to cover debts, they may have to sell assets at a fair market value to cover the costs.

If debts still exceed the assets, the estate may be considered insolvent, and beneficiaries may not receive any inheritance.

Where Are the Estate Funds Held During the Probate Process?

The appointed executor or administrator should establish an estate bank account to hold all the financial assets. Having an estate-dedicated account makes it easier to keep track of all estate income and expenses in one place.

The financial assets can then be used to satisfy all the estate creditors before distributing whatever remains to the heirs and beneficiaries.

For transparency, we encourage executors or administrators to create a detailed record of all estate-related transactions. This record will be beneficial in case of legal disputes or audits.

What Happens to Joint Financial Accounts When One Account Holder Passes Away?

When one account holder of a joint financial account dies, ownership automatically transfers to the surviving owner(s). In most cases, probate is not necessary to make this happen.

What Happens to 401(k) When You Die? How to Claim 401(k) After Death in Georgia?

First, it should be established if the 401(k) in question is a Probate Asset or a Non-Probate Asset.

If the 401(k) has a beneficiary listed directly on the asset, then it may be considered a non-probate asset. Non-probate assets are handled by the financial institution that holds the asset and the listed beneficiary and do not go through the GA probate process.

If someone believes that they are the beneficiary of a 401(k), it is common for them to contact the financial institution to discuss their options for claiming the asset.

If the 401K does not have a beneficiary listed on it, then it may have to go through the GA probate process to be properly distributed.

If there is a will, the named executor will often attempt to probate the will with the probate court. If the court accepts the will and appoints the executor, the executor can then distribute estate assets per the will instructions once the creditor deadline has passed and all creditors of the estate have been properly satisfied.

Please note that if there are not enough assets to satisfy the estate creditors then assets, such as the 401(k), may have to be liquidated to properly satisfy all debt.

If there is not a will then an individual (many times a family member of the deceased) will attempt to open the estate with the probate court to become appointed as the administrator over the estate.

If the court appoints the administrator, subsequently he can distribute estate assets per the intestate laws in Georgia once the creditor deadline has passed and all creditors of the estate have been properly satisfied.

401(k) beneficiary rules for surviving child and surviving spouse

In Georgia, there are no special 401(k) beneficiary rules for the surviving child or the surviving spouse. They all need to follow Georgia state laws depending on their respective situation.

Can Someone Use the Deceased’s Bank Account?

If the account has a joint owner, it may be viewed as a non-probate asset. This means the surviving co-owner can access and take ownership of the account.

If the account solely belongs to the deceased, nobody should use it until an executor is appointed, even if there is a power of attorney. This is because the power of attorney immediately ends when the principal dies.

After the principal’s death, the deceased’s will or the Georgia intestacy law would determine what happens to the account.

When Do the Heirs or Beneficiaries Receive Their Inheritance?

The heirs and beneficiaries will receive their portion of the estate during the final phase of the probate process known as distribution.

During this stage, the estate’s personal representative will allocate the remaining assets to heirs and beneficiaries before filing the required paperwork with the Probate Court to close the estate.

Who Is Responsible for the Deceased Person’s Bills?

paying debts in probateThe Probate Court appoints an executor or administrator (also known as a personal representative) to settle the deceased’s creditors using the estate assets.

Per GA law, once creditors have been satisfied in the correct order, the personal representative can then distribute the remaining assets to the heirs or beneficiaries.

It is important to note that the personal representative is not personally responsible for the deceased person’s financial obligations.

Is there a way to avoid creditor claims?

With proper estate planning and key paperwork, it is possible to bypass some creditor claims.

Many debt collectors are familiar with these tactics and may attempt to resist the process by pressuring family members to pay.

If creditors are harassing you, seek professional advice from an estate attorney to know and protect your rights.

How to Avoid Taxes on 401(k) Inheritance? Is It Possible?

Concerning inheritance taxes, we recommend speaking to a CPA specialized in estate taxes, as we, as attorneys, are not tax professionals and can only assist in settling the estate.

How Long Does Probate Typically Take for Financial Estate Assets? How Long Does It Take to Get 401(k) Inheritance?

To get access to financial assets and 401(k) inheritance, you need to expect the closure of the probate process.

Probate duration depends on estate size, complexity, beneficiary disputes, and court efficiency.

It can generally take several months to a year or more to complete. This process can be delayed further if legal challenges or estate disputes emerge during probate.

Can Beneficiaries Access the Financial Assets Before Probate Is Complete?

For probate assets, beneficiaries cannot access the deceased person’s assets before probate is complete. Any unauthorized access to the assets can result in legal consequences.

However, in some cases, beneficiaries can receive part of their inheritance during probate through a process called preliminary distribution.

Preliminary distribution involves filing a petition and obtaining approval from the Probate Court to receive a partial distribution of the assets.

Another way to get a portion of the inheritance is through a year’s support claim if you are the decedent’s surviving spouse.

When does the court allow preliminary distribution?

what happens to 401k when you dieNot everyone can file for preliminary distribution. Typically, the court grants it under certain circumstances, such as when:

  • All beneficiaries agree to the distribution.
  • It is in the best interests of the estate and beneficiaries.
  • There is enough money in the estate to cover all of the debts and expenses.

It is best to consult with a probate attorney to determine whether the preliminary distribution is a viable option for you.

Next Step

Although this article provides guidance on managing a deceased person’s financial assets during probate, it is always best to consult a probate attorney. This resource only covers some of the most common questions, but your circumstances may be different.

Our experienced lawyers are always here to help. For any legal support you need, you can contact us anytime at (770) 796-4582.


More information

Disclaimer These websites have not been reviewed by Georgia Probate Law Group and are not endorsed or even recommended by Georgia Probate Law Group. These websites are additional resources that you can use to further your general education on this topic.

Disclaimer: The information above is provided for general information only and should not be considered legal advice. Our probate attorneys provide legal advice to our clients after talking about the specific circumstances of the client’s situation. Our law firm cannot give you legal advice unless we understand your situation by talking with you. Please contact our law office to receive specific information about your situation.

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About the author

Erik J. Broel
Founder & CEO

Erik founded the firm in 2009. He sees it as his personal mission to demystify the process of handling an estate or trust, and to help people by making the complex estate process simple and accessible. He believes there is always a better way to do things, and loves finding new and innovative ways to deliver better, more effective service that solves the client’s key problem or issue, and improves the client’s life.

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