Are you an executor for a family member, friend or another person? An executor of a will is someone appointed to administer the will and carry out the last wishes of someone when they die.
Opening an estate bank account can make your job a little easier. Here’s what to know about this unique type of account.
The Short Answer: Generally No, But There Are Exceptions
The general rule is that you cannot set up an executor account before receiving formal probate authorization Most banks require official documentation proving your legal authority to act on behalf of the estate before they’ll let you open an account in the estate’s name,
As Mary Randolph, J.D. from UC Berkeley School of Law explains in her articles about estate administration, proper authorization is essential before handling estate funds. But don’t worry – I’ll explain some alternatives and exceptions that might help you manage things in the meantime.
Understanding Executor Accounts and the Probate Process
Before diving deeper, let’s clarify what these accounts are and why they’re important:
An executor account, sometimes called an estate account, is a temporary bank account used to handle the estate’s finances during probate. It is separate from both the executor’s personal accounts and the personal accounts of the person who died.
The probate process is the legal procedure for administering someone’s estate after death, which includes:
- Paying outstanding debts
- Settling tax obligations
- Distributing assets to beneficiaries
- Managing estate expenses
Why You Need an Executor Account
Setting up a dedicated estate account offers several important benefits:
- Prevents commingling of funds: Keeps estate money separate from your personal finances
- Simplifies record-keeping: All estate transactions flow through one account
- Makes accounting to beneficiaries easier: Provides clear documentation of all financial activities
- Protects against fraud: Offers additional security for estate assets
- Streamlines the probate process: Makes it easier to track income, expenses, and distributions
As noted in TheMoneyKnowHow article, “Accounting for every transaction made is incredibly easy when you have an estate bank account. Most banks can offer a thorough account summary in the unlikely event that the executor needs to substantiate the transactions.”
When Can You Actually Open an Executor Account?
To open an executor account, you typically need:
- Formal appointment as executor: You must be officially appointed by the court
- Letters testamentary or letters of administration: These court documents confirm your authority
- Death certificate: A certified copy is required
- EIN (Employer Identification Number): A tax ID number for the estate obtained from the IRS
- Your personal identification: Government-issued ID
According to Keystone Law Group, “Before the nominated executor can access estate assets, they must formally be appointed to the role. The court generally appoints an executor at the initial probate hearing.”
Getting an EIN for the Estate
One crucial step in setting up an executor account is obtaining an Employer Identification Number (EIN) for the estate from the IRS. This serves as the tax identification number for the estate.
You can apply for an EIN:
- Online at the IRS website (fastest method)
- By submitting Form SS-4 by mail
When applying, you’ll select “estate” as the type of organization applying for the EIN.
Exceptions and Alternatives Before Probate
You usually can’t open an official executor account before probate, but here are some other options to think about:
1. Joint Accounts with the Deceased
If you were a joint account holder with the deceased person, you may still have access to those funds. As Keystone Law notes, “Joint ownership refers to a way of holding title in which two or more people share equal ownership of an asset for their lifetimes. When one co-owner dies, the remaining co-owners assume ownership of the deceased co-owner’s share of the asset.”
However, be careful about using these funds for estate purposes, as joint accounts typically aren’t considered part of the probate estate.
2. Small Estate Procedures
Some states have simplified procedures for small estates that might allow access to funds sooner:
- These procedures typically apply to estates valued below a certain threshold (varies by state)
- They may allow for transfer of assets without full probate
- Requirements and limitations vary significantly by state
3. Informal Temporary Accounts
In limited cases, some banks might allow a “temporary” or “informal” executor account before formal probate, especially if:
- You can provide the death certificate
- You can show you’re named as executor in the will
- You have a pressing need for estate funds
These accounts usually have significant restrictions on withdrawals and activities.
What NOT to Do Before Probate
While waiting for probate, avoid these common mistakes:
- Don’t use your personal funds for estate expenses without keeping meticulous records
- Don’t transfer estate assets into your name before proper authorization
- Don’t distribute any assets to beneficiaries before debts and taxes are addressed
- Don’t ignore creditor claims against the estate
- Never commingle estate funds with personal funds
The Keystone Law Group says, “An executor has a duty to act only in the best interests of the beneficiaries.” They are breaking their duties when they act in their own best interests or the best interests of someone other than the beneficiaries. “.
What Kind of Bank Account Should You Open for an Estate?
Once you receive probate authorization, you’ll need to choose the right type of account:
- Basic checking account: Suitable for most estates that will complete probate within a year
- Interest-bearing checking account: Better option if significant funds will be held
- Combined brokerage and cash account: Good for longer estate administration periods
Mary Randolph advises: “During a typical probate, which lasts less than a year, a basic checking account will work. You can deposit any estate income into it and use the funds to pay debts and expenses. Especially if a significant amount of money is involved, try to find an account that pays at least a small amount of interest.”
Important Tip: Don’t Open an Out-of-State Account
If you live in a different state than the deceased person did, you might be tempted to open the estate account near you. This is a mistake!
When someone dies and you live in a different state, you might be tempted to open an estate account close to where you live instead of where the person lived. Don’t do it. You might have to file a state tax return for the state where the estate makes money if it does. “.
Using the Executor Account Properly
Once you’ve opened the estate account, here’s how to use it correctly:
Deposits to Make:
- Funds from the deceased’s bank accounts (that aren’t joint accounts or payable-on-death accounts)
- Income from estate assets (dividends, rental income, etc.)
- Proceeds from selling estate assets
- Refunds or reimbursements owed to the deceased
- Insurance payouts to the estate
Appropriate Withdrawals:
- Estate administration costs
- Court filing fees
- Funeral expenses
- Outstanding debts of the deceased
- Tax payments
- Professional fees (attorneys, accountants, appraisers)
- Distributions to beneficiaries (after debts and taxes are paid)
Record-Keeping Requirements
As executor, your record-keeping must be impeccable:
- Document every deposit with date, amount, and source
- Track every withdrawal with date, amount, recipient, and purpose
- Keep all receipts and invoices
- Maintain copies of bank statements
- Create a transaction log or spreadsheet
- Be prepared to account for every penny to beneficiaries
According to TheMoneyKnowHow, “A thorough accounting of all the money that came into and went out of the estate must be provided by the executor when they have completed the estate administration process and are getting ready to give the beneficiaries the remaining portion of the estate.”
What If You Need to Pay Expenses Before Probate?
Sometimes estate expenses arise before you can open an executor account. If this happens:
- Keep meticulous records of any personal funds used for estate expenses
- Save all receipts and document the purpose of each expense
- Reimburse yourself from the estate account once it’s established
- Clearly note in estate records why reimbursement was necessary
Keystone Law advises: “If you ever find it absolutely necessary to pay expenses with personal funds and then reimburse yourself from estate assets, keep meticulous records.”
Final Thoughts: Working with Professionals
Managing an estate is complicated, and mistakes can be costly. Consider working with:
- Probate attorney: Can guide you through legal requirements
- Accountant: Helps with tax filings and financial management
- Financial advisor: Can assist with investment decisions for estate assets
These professionals can help ensure you fulfill your duties properly and avoid potential liability.
While you generally can’t set up an executor account before receiving formal probate authorization, understanding the process ahead of time helps you prepare. Once you’re officially appointed, setting up a proper estate account should be one of your first priorities to ensure transparent and efficient estate administration.
Remember that as executor, you have a fiduciary duty to act in the best interests of the estate and its beneficiaries. Maintaining proper financial separation and excellent records is essential to fulfilling this responsibility.
Have you gone through the process of setting up an executor account? What challenges did you face? Share your experiences in the comments below!
What Is an Estate Bank Account?
An estate bank account is a special type of bank account that holds an estate’s money. During the probate process, you can use the money in this account to pay taxes, loans, mortgages, car payments, and utility bills. It can also be used to give assets to beneficiaries.
What Happens After All the Accounts Are Settled?
Once you’ve settled any taxes and debts, distributed assets to beneficiaries and finished the probate process, the estate account can be closed. These accounts are designed to be temporary.
When you’re carrying out your responsibilities as an executor, you may also be grieving if you had a personal relationship with the person who passed. Farm Bureau’s financial advisors understand that there are people behind the numbers. Reach out to connect with someone who cares.
Should executor open an estate bank account?
FAQ
Can an executor do anything before probate?
Although there are some exceptions, it is usually against the law for you to start sharing out the estate or to get money from the estate, until you have probate or letters of administration.
When can I open an executors account?
The individual must have already completed the probate application and the inheritance tax forms in order to receive the grant or confirmation. If someone has the Grant or Confirmation, he can go to a bank and ask for this special executor account.
Can an executor access bank accounts before probate?
Generally, financial institutions require wills to be probated before releasing assets to the executor.
Can you open an estate account without probate?
Probate is the process by which the assets of a deceased person’s estate are looked over by an administrator, who then gives the assets to the people that the owner wanted. However, if the deceased had set up a trust for their estate, no probate is needed.
Should an executor open an estate bank account?
In most cases, we recommend executors to open an estate bank account. This account, reserved solely for the estate’s financial transactions, is a temporary one that the executor of a will uses to consolidate all of the estate’s funds.
How do I open an estate account for probate?
An estate account for probate is typically opened with the assistance of your probate lawyer. However, any executor appointed by a probate court is authorized to do so, as well. If you’re doing it yourself, it’s often most convenient to open the estate account at the same bank as the decedent’s existing account.
Is it better to open an estate account with probate?
Using informal accounts before appointment can complicate accounting and expose the executor to liability. Is it better to open an estate account with probate or without probate? It is almost always better to open an estate account with probate authority rather than risk informal arrangements.
What happens if an executor doesn’t have an estate bank account?
Without a separate estate bank account, it can be easy for an executor to accidentally use the estate’s funds for their own personal use. This creates personal liability concerns for the executor – estate bank accounts can help to minimize this risk.
Can an executor open an estate bank account in BC?
Executors in BC can open an estate bank account before the will has been granted probate. It’s no secret that managing an estate means doing a lot of different things, like paying off the person who died’s debts or selling their house.
Can I open an estate bank account?
In order for you to open an estate bank account, the court must acknowledge that you are legally acting on behalf of the estate as executor or administrator.