How to Inherit Bank Accounts in Michigan

When someone passes away in Michigan, their bank accounts become part of their estate and are subject to specific state laws and procedures.

The inheritance process varies depending on how the account was titled and whether the deceased left a will.

Types of Bank Account Ownership

Individual Accounts

Accounts solely owned by the deceased must go through probate unless they're designated as "Payable on Death" (POD) or "Transfer on Death" (TOD).

The probate court will oversee the distribution of these assets according to the will or Michigan intestacy laws if no will exists.

Joint Accounts

Michigan recognizes several forms of joint ownership:

• Joint Tenancy with Rights of Survivorship: The surviving account holder automatically inherits the entire account balance without going through probate. Banks typically require only a death certificate to transfer ownership.

• Tenancy in Common: Each owner has a distinct share of the account. The deceased owner's portion must go through probate and will be distributed according to their will or state law.

POD/TOD Accounts

These accounts bypass probate entirely. The designated beneficiary can claim the funds by presenting the death certificate and identification to the bank.

Multiple beneficiaries receive equal shares unless otherwise specified.

Michigan Probate Process for Bank Accounts

Small Estate Procedures

Michigan offers simplified procedures for estates valued under $25,000:

• Complete form PC-598 (Affidavit of Small Estate)
• Present the affidavit to the bank with the death certificate
• Wait 28 days from the death date before distribution
• No court supervision required

Regular Probate Requirements

For larger estates:

• File a petition with the probate court
• Obtain Letters of Authority naming the personal representative
• Present Letters of Authority to the bank
• Pay estate debts before distribution
• File final accounting with the court

Tax Implications

Federal Estate Tax

• Only applies to estates exceeding $12.92 million (as of 2023)
• Includes all assets, not just bank accounts
• Rate ranges from 18% to 40%
• Surviving spouses receive unlimited marital deduction

Michigan State Tax

Michigan has no estate or inheritance tax, but:

• Income earned by the account after death is taxable
• Final income tax returns must be filed for the deceased
• Estate may need to obtain a tax ID number

Income Tax Considerations

Inherited funds are generally not taxable, but:

• Interest earned before distribution is income to the estate
• Interest earned after distribution is income to the beneficiary
• Required Minimum Distributions from inherited IRAs follow special rules

Claiming Inherited Accounts

Required Documentation

Beneficiaries need:

• Original death certificate
• Government-issued photo ID
• Social Security number
• Proof of appointment as personal representative (if applicable)
• Court orders (for probate cases)

Bank Procedures

Standard steps include:

• Notifying the bank of the death
• Freezing the account to prevent unauthorized access
• Providing required documentation
• Opening new accounts for estate funds
• Transferring funds to beneficiaries

Special Circumstances

Creditor Claims

Michigan law provides:

• 4-month creditor claim period
• Protection of certain joint accounts from creditors
• Priority order for debt payment
• Procedures for contesting claims

Disputed Inheritances

Common issues include:

• Challenges to beneficiary designations
• Questions about account ownership
• Claims of undue influence
• Missing documentation

Timeframes and Deadlines

Important Periods

• 28 days: Minimum waiting period for small estates
• 4 months: Creditor claims period
• 1 year: Typical minimum for regular probate
• 3 years: Statute of limitations for contesting a will

Best Practices

Record Keeping

Maintain detailed records of:

• All communications with the bank
• Court filings and orders
• Tax documents and payments
• Distribution receipts
• Estate expenses

Professional Assistance

Consider hiring:

• Probate attorney for complex estates
• Accountant for tax matters
• Financial advisor for large inheritances
• Professional mediator for family disputes