Estate Account

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 What Is an Estate Account?

After someone passes away, their assets and debts will need to be accounted for and managed. One way to handle this is to have a separate bank account opened after the person’s death, which is referred to as an estate account. It will be the job of the estate’s executor to set up and monitor the account. The executor will also need to handle deposits, distributions, and debt payoffs from the account’s funds.

Say someone dies with a will in place that appoints a specific person to handle their estate. This person will be the executor of the estate. The will also names two beneficiaries, lists outstanding debts, and details the person’s desired funeral arrangements. The executor should consider opening a separate estate account to help manage everything. The will itself could also explicitly state that the executor must open an estate account, if it was the person’s intent to have this done.

After the executor opens the account and deposits funds, they should use some of the money to pay for the desired funeral arrangements. Next, the executor should withdraw money to pay off all outstanding debts or other expenses. After all this, the remaining money and other assets should be distributed to the beneficiaries according to the will’s terms.

There are many benefits of opening an estate account that you should become familiar with if you are thinking about your will or are appointed as an executor of another person’s estate. You should also become familiar with how to open an estate account and handle potential legal disputes.

What are Some Reasons to Open an Estate Account?

There are several benefits for opening an estate account. First, it will keep all money in one place and help the executor with estate management. This will also give the executor clear accounting of what is in the estate and will prevent inaccessibility to frozen assets.

Another reason in favor of opening an estate account is that it prevents commingling of funds. Oftentimes, there will be a surviving account holder on the decedent’s bank account. Common examples are the person’s spouse or child. This can prevent several issues, including:

  • Failure to keep the living person’s money separate from the deceased;
  • The account holder claiming rights to all the money in the account;
  • Disputes about managing the estate when the surviving account holder and executor are two different people; and
  • The bank or government refusing to treat the funds in a joint account as belonging to the decedent (for distribution or tax purposes).

These are just a few problematic issues that can arise when there is not a separate estate account. This can affect distribution to beneficiaries and prevent the decedent’s will from being carried out accordingly. It can also make the estate management process very confusing overall, which will likely draw out the process and utilize unnecessary resources.

How Can I Open an Estate Account?

You will need to check your state’s laws regarding the process for opening up an estate account. However, the process will typically incorporate the following steps:

  • File paperwork with the appropriate court to get approval to open an estate;
  • Have the executor appointed, which will be included in the will unless the person did not name an executor or have a will. In that case, the court would appoint someone to manage the estate;
  • Account for all money and other assets that make up the estate;
  • Apply for a taxpayer ID number for the estate with the IRS, which will need to be attached to the estate account; and
  • Choose a financial institution to open up the estate account, open it, and transfer all funds.

Remember that funds do not just include the money in the decedent’s personal bank accounts. This will also include things like stock dividends and rental income. Also check to make sure whether you need to get court approval or file any additional paperwork with the court before opening up the account. An estate lawyer can help you with this and also inform you about any other steps you will need to take under state law.

How Can I Handle a Legal Dispute Over an Estate Account?

If you are an executor, you may face legal challenges regarding how you handle the estate. While executors have discretion with estate management, they are obligated to follow the intent of the will (if one exists) and handle the decedent’s estate in a reasonable and prudent manner. If you fail to do so, other people with an interest in the estate could challenge your actions.

Some instances where legal dispute could arise with an estate account is if the executor uses the money for personal use or failure to follow the estate plan’s directives. This could lead to the executor being removed and replaced. In serious cases, the executor will likely have to pay damages to the estate.

To handle disputes over the estate account, the executor must always refer back to the estate plan or other written evidence that can support their actions. This will help show that the actions were in line with the decedent’s intent. Performing actions outside of or contrary to a will can get the executor in legal trouble, as noted above.

Do I Need to Hire a Lawyer for an Estate Account Issue?

A person’s estate should be handled with the utmost care and all applicable laws must be followed. When opening up an estate account a local estate lawyer can be a great resource. Your attorney will know relevant estate laws, can help you set up an estate account, and can represent you in court if any legal disputes arise.


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