What is an Estate Bank Account?
If you have been appointed by the probate Court as an executor of an estate, you will be responsible for paying outstanding bills, court costs and lawyer fees and distributing the remainder of the estate’s cash assets to the beneficiaries. This may take months or years to finalize, depending on the complexity of the estate.
These responsibilities are not typically handled through the deceased person’s checking or savings account. Instead, all money which are probate assets held in these accounts should be transferred to a special estate account so all of the money coming in (from dividends, rentals, refunds, etc.) and going out can be easily accounted for.
3 Estate Bank Account Tips
- The estate will need to be assigned a taxpayer ID number. This can be requested through irs.gov: IRS Form SS-4, Application for Employer Identification Number.
- An estate checking account should be filed under the name of the deceased person and the name of the executor.
- The account should be set up in the same state where the deceased person lived, rather than in the state where the executor lives. This will eliminate the need to do a tax return for multiple states.
Using an Estate Bank Account
Record, record, record! Every transaction should be carefully recorded in a ledger in case there is any question about how the account has been handled. As with your own personal account, make sure there is enough money in the account to cover all payments that are made. You don’t want to be responsible for incurring out-of-pocket costs for these mistakes. Keep in mind that this money is not your personal petty cash; it can only be used for purposes related to the estate.
Setting up the proper type of estate bank account in Colorado can be more complicated if you think the probate process will take a long time to wrap up or if you need a more diverse account that can accommodate both cash and investments. You may wish to enlist the help of an estate planning lawyer to help you determine the best way to carry out your executor duties.