If your loved one had a convenience account

Important takeaways about convenience accounts

• A convenience account is established to let another person use the funds for the benefit of the owner, such as to pay their bills and run errands.

• Convenience accounts are not joint accounts, and they become part of the owner's estate when they pass away.

• The co-signer cannot use the funds at all after the person's passing, even for funeral or estate expenses.

• Only some states have convenience accounts. In others, informal convenience designations will be treated as joint accounts unless the co-signer objects.

If you’re named the executor of your loved one’s estate after they have passed away, you’ve likely been sorting through paperwork and account information—all while trying to manage your own emotional well-being. It can be overwhelming, and the different types of accounts can start to blur together. If you know of or have come across something called a convenience account, you may have wondered what exactly this is, and what the implications are for wrapping up your loved one’s financial affairs.

Convenience accounts are bank accounts that are set up to give someone else (usually a spouse or other family member) the authority to use the money in the account, but only to pay for things that benefit the account holder. Typically, they are established because your loved one needed someone to help out with errands for them, or if they were concerned about keeping on top of their bills and other expenses on their own.

A convenience account can allow someone besides the account holder to write checks or use online accounts to pay bills and keep up with medical costs, to go shopping for them, and to take out cash or make deposits. It’s an alternative to giving someone full power of attorney, which might have provided the chosen co-signer with more power than the person would have liked. 

How does a convenience account work?

Convenience accounts are set up like a power of attorney, but only for this one particular account. Simply put, this means that the account owner chooses a co-signer, and then that person can use the funds on the account owner’s behalf, for any of the owner’s needs.

The co-signer does not own the money and can not use it for anything outside of what the account owner has designated and approved. 

This type of account is different from making someone a co-owner of the account. If someone is a co-owner, they have full access to and control over the funds. A co-owner will inherit the money after the other owner has passed, and can be liable for the other person’s debts, which is not always what either person wants.

What happens after my loved one has passed?

Convenience accounts do not have any “right of survivorship,” meaning that no one automatically inherits the money. After the account holder passes away, the funds in the account will be considered part of their estate. In probate, any convenience account will be assessed in the estate’s value and either used to pay off creditors or distributed to your loved one’s beneficiaries.

It is common for the co-signer on a convenience account to also be the executor of the estate, so it’s important to remember that this account cannot be used in any way after the person passes away, even to pay funeral or estate-related expenses. The executor will need to set up a different account for the estate, from which they can pay any outstanding debts and other expenses involved in probate. Once this estate account has been set up, the convenience account can be closed and the money moved into the new account.

What if I suspect my loved one’s account was misused?

Your loved one’s convenience account probably made their life much easier on a day-to-day basis by letting someone they trusted tend to their financial matters. It’s always important to assume good intentions on the part of everyone involved, especially during this difficult time for your family, but sometimes tough questions do come up. Try to talk with the co-signer and sort through your doubts before jumping to conclusions.

If you have a solid reason to believe that a co-signer misplaced your loved one’s trust in them and misused the account, consult with an estate lawyer or other attorney about next steps and potential resolutions. 

Is my joint account a convenience account?

Although people have been giving access to their accounts to family members for years to help them out with paying bills, it is only very recently that there has been such a thing as a legal designation of an account as an official “convenience account.” Only about half of the states have adopted this legal definition, and even in those states, not every bank offers the option to create a convenience account. Depending on where they lived and their bank of choice, it’s very possible that your loved one created a joint account with someone and simply informally designated it as only for use on their behalf. 

This complicates things, because legally most joint accounts pass automatically to the joint owner. If the account was intended as a convenience account but not officially designated as one, then it would be up to the joint owner to decide to tell the probate court that it should be part of the estate rather than transferring directly to them. The judge would then determine its intended use and how that affects the estate overall. Consider contacting an estate lawyer to review your options in this case.

Convenience accounts are just one piece of the puzzle that an executor will need to sort through, but they don’t usually create any added hassle. Factor it in as part of the estate while doing inventory of your loved one’s property, so that the assets in it can continue to be used as they intended.

You may be eligible for free bereavement support. Empathy can help with everything from funeral planning to estate administration, with step-by-step guidance and real-time expert support. Many people get free premium access to Empathy as a benefit with their life insurance claim. We partner with New York Life, Guardian Life Insurance Company, Bestow, Lemonade, and other leading carriers. When you make your life insurance claim, talk to your representative about whether Empathy is a benefit they offer.