An estate account is a new account opened after someone has passed away. The named estate Executor is in charge of setting up the account and managing it. The account can be accessed by the Executor of the estate to deposit the decedent’s money and pay the decedent’s personal debts and bills, including funeral expenses. It is also the account from which the Executor distributes any applicable funds to beneficiaries of the estate. When the money is in the Estate account, the Executor holds it in trust for the beneficiaries of the estate.
The laws are different in each state, but generally, the process typically begins by filing appropriate papers with the court to open the estate. After the estate is opened, the court appoints the Executor (either someone named in the will or someone who is nominated if there is no will). The estate Executor has the power to act on behalf of the estate. The Executor must first open an estate bank account for all the decedent’s individual monies.
To open the estate account, the Executor will need a taxpayer ID number for the estate. A taxpayer ID can easily be applied for online at www.irs.gov. Once the account is opened, the decedent’s funds must be transferred to the account from her personal bank accounts. All stock dividends and rental income from properties owned by the decedent should also be transferred into the estate account.
If a person dies with assets in his or her name, the assets are typically “frozen.” In other words, they cannot be accessed until an Executor of the decedent’s estate is named. Frozen assets are completely inaccessible, even to the future executor of the estate or to anyone who had power of attorney during the decedent’s lifetime. An estate account allows the Executor to access the decedent’s funds.
Many people don’t think they need to open an estate account because they hold a joint account with the decedent. This nevertheless is problematic if the surviving account holder continues to deposit money in the joint account, thereby commingling the money relating to the decedent and the money from the surviving account holder. The surviving account holder may also claim that all the money in the account, including the decedent’s money, should belong to her alone at the expense of the decedent’s beneficiaries.
Under state laws, the duties of the Executor include managing the deceased person’s funds in a reasonable and prudent manner. This includes not using the estate account monies for their own personal use, and investing or distributing the money according to the instructions in the estate planning documents. Failure to abide by these duties may result in a removal of the Executor. An Executor who is found to be at fault may be required to pay damages to the estate.
On the other hand, disputes between beneficiaries regarding the estate account do need to be handled initially by the estate administrator. At times, the estate administrator may be required to make decisions as to whether a certain person should receive beneficiary distributions or not. They may need to consult the will or file a case with the court if they need clarification.
Estate accounts need to be set up and handled with great care. If you need assistance with an estate account, you may need to hire an estate lawyer for advice. Your attorney can provide you with information on how estate accounts work, and can inform you of your duties with regard to the account. If there is a dispute over the estate account, a lawyer may be needed to represent you during court hearings.