22 May Probate 101: What Is An Estate Account?
Ben Franklin once said that nothing in life is certain except for death and taxes. This has proven to be true, but if Franklin was an estate planner, he probably would’ve included bills in his idiom since they are something everyone leaves behind when they die. The responsibility of paying the bills left behind by the deceased falls to their personal representative. In order to pay the bills, the representative has to set up an estate account. Read on to learn what an estate account is and how to set one up.
What is an estate account?
An estate account is a bank account that a personal representative uses to pay the estate’s expenses. The most common form of estate account is a checking account. However, unlike a regular checking account, an estate account is set up under the name of the estate. The deceased’s personal representative is the person who can open the account and write checks from it.
Joe Smith passed away on June 25th and the court appointed his son, John Smith, as the personal representative a few weeks later. John now has the authority to open an estate account under the name of the Estate of Joe Smith. Any company issuing a check to Joe Smith after his date of death will make the check out to the Estate of Joe Smith. John will deposit those checks in the estate account.
How does a personal representative open an estate account?
A personal representative can open the account by bringing the following documents to the bank:
- A form of identification: The bank will compare the personal representative’s identification to the name on the court and tax documents related to the deceased’s estate to make sure the name matches. Then, the bank will make a copy of the representative’s identification for its file. A driver’s license, passport or birth certificate are all examples of forms of identification a personal representative can use to open the account.
- EIN: The bank may refer to this document as the Employer Identification Number or Form SS-4. The EIN is the Tax ID number for the deceased’s estate. In order to obtain an EIN, the personal representative needs to complete this application on the IRS website. It should take about 20 minutes to complete. Click here for a detailed explanation on how to apply for an EIN.
- Letters of Personal Representative – Lastly, the representative needs an original or certified copy of the court order naming them as personal representative. The bank will make a copy of the original court order and return it to the representative.
Why is opening an estate account necessary?
The main reason a personal representative needs an estate account is because they are responsible for paying the debts of the estate. A personal representative generally can’t use the deceased’s bank account to pay their debts because banks usually freeze those accounts when someone dies. The bank will close the deceased’s existing accounts and issue a check to their estate, and that check will go into the newly created estate account. Additionally, the representative will probably receive checks written to the estate and will need a place to deposit that money.
On a side note, estate bank accounts are not the same as trust bank accounts. Normally, the personal representative does not need to close trust bank accounts at the time of someone’s death. The successor trustee can legally continue to use trust accounts.
How Can Boyum Law Firm Help You?
Boyum Law Firm can help you and your loved ones through the probate process. To contact Boyum Law Firm, click here.