To settle a deceased person's estate, you'll need a separate bank account for estate funds.
Once you've been appointed executor or personal representative by the probate court, you'll probably want to open a bank account in the name of the estate. Usually, an account for an estate is registered in this or a similar way: "Estate of Gerald S. Smith, Deceased, Pamela S. Smith, executor."
What Kind of Bank Account to Open for an Estate
You'll want an account that allows you to write checks, so you can pay the deceased person's final bills and probate court costs and eventually distribute monetary gifts to beneficiaries. Which kind of account is right for you depends on your circ*mstances.
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.
If you think the estate may be open longer, a checking account might work, but it might be a better idea to set up a single account that can handle both investments and cash. For example, companies such as Fidelity, Charles Schwab, Vanguard, and others offer combined brokerage and cash accounts that let you write checks. Everything shows up on one statement, which greatly simplifies your record keeping.
Getting an IRS Tax Identification Number or EIN for the Estate
To open any bank or investment account, you'll need a tax identification number for the estate. This number is also (confusingly) known as the Employer Identification Number or EIN, though obviously neither you nor the estate is an employer. You can apply for an EIN online at the IRS website. When you do, you'll be asked what type of organization is applying for the EIN, and you'll see an option for "estate."
The same SS-4 form is also available in PDF form. You can fill it out and then mail it in. If you mail in a paper form, you should get your ID number (EIN) back in a few weeks.
Using the Estate's Bank Account
Once you've opened the estate account, transfer the funds from the deceased person's bank accounts to the estate account. However, don't touch the following accounts, which do not go through the probate process:
- payable-on-death accounts, which go directly to the named POD beneficiary and are not part of the estate, and
- joint tenancy accounts, which belong to the surviving joint owner.
Also deposit all income you receive on behalf of the deceased person or that is generated by estate assets—stock dividends, refunds, or rental income from an apartment building, for example.
You can use the money you deposit in the estate account to pay debts, taxes, probate court filing fees, and lawyer or other professional fees.
As Executor, Keep Good Records of All Transactions
When you deposit money, make sure you have records of the amount, date, and source—whether that record is online or in your physical files. Similarly, when you write a check, make sure you have tracked the amount, date, recipient's name, and purpose.
If more money than you'll need for expenses over the next few months starts piling up in the account, you should probably transfer the surplus to a federally insured interest-bearing account or safe investments such as short-term government bonds. Any new accounts you open for the estate should, of course, be held in the name of the estate and not in your own name.
If you incur bank fees because of your own carelessness—an overdraft charge, for example—you'll be personally responsible.
Never Mix Personal and Estate Funds
If you ever find it absolutely necessary to pay expenses with personal funds and then reimburse yourself from estate assets, keep meticulous records. For example, say you find yourself at the court clerk's office without the estate checkbook and need to pay a fee. If you write a check from your personal account or use your own credit card, be sure to get a receipt and put it in your files. And when you reimburse yourself from the estate account, note exactly why.
As an executor or personal representative, you have a responsibility to manage estate property with absolute integrity.
For More Information
If you're just getting started as an executor, spend some time looking through the articles we have filed under settling an estate.
