After becoming the personal representative of a family member’s or friend’s estate, one of the first steps of estate administration is establishing a separate checking account for the estate. Having an estate checking account lets personal representatives separate pre- and post-death finances.
Understanding Estate Checking Account
Once you’ve been appointed as the personal representative of a loved one’s estate, you should open an estate checking account. An estate checking account serves as a temporary account to manage the estate’s financial affairs. A personal representative must request an employer identification number (EIN) from the IRS to open a checking account with a financial institution. The EIN serves as the equivalent of a Social Security Number/taxpayer identification number for the estate.
The estate checking account will take over any funds in the decedent’s savings or checking accounts and can receive the proceeds of any sales of estate assets. The personal representative can use estate checking account funds to pay the estate’s expenses. Once the personal representative has resolved the decedent’s and estate’s liabilities, they can distribute any remaining funds in the estate checking account to the decedent’s beneficiaries or heirs according to the decedent’s will or state intestacy laws.
What Can You Use an Estate Checking Account For?
An estate checking account gives personal representatives an appropriate method for managing an estate’s finances. After gathering the decedent’s cash assets and placing them into the estate checking account, the personal representative can use the account to pay for the estate’s expenses, such as:
- Funeral and burial expenses
- Paying the decedent’s final expenses, such as medical bills or their last credit card bills
- Paying expenses to maintain the estate’s assets, such as real estate taxes, homeowner’s insurance, or utilities for the decedent’s property
- Paying for costs of estate administration, such as reasonable fees for the personal representative’s services, legal fees, accounting fees, appraisal expenses, or financial advisor fees
The personal representative can deposit any cash the estate receives, such as death benefits from life insurance policies, pension benefits, or the sale proceeds of any estate assets, including stocks, vehicles, or real property.
After completing a final accounting, the personal representative can pay any remaining cash assets in the estate to the decedent’s beneficiaries or heirs and then close down the account.
What Happens If You Use the Decedent’s or Your Personal Checking Account?
A personal representative should not use the decedent’s existing bank accounts or the personal representative’s checking account to manage estate finances. In many cases, financial institutions will freeze or close down a decedent’s accounts once the institution receives notice of the decedent’s passing. Trying to use the decedent’s accounts after the bank has closed them may lead to a severe misunderstanding at best or financial and criminal liability at worst. An attorney can help you exercise your authority as administrator or executor to gather the decedent’s cash assets from financial institutions and place those assets into the estate checking account.
Personal representatives should avoid using their personal checking accounts to cover estate expenses, and they should not deposit estate funds into their personal accounts. When a personal representative mixes their personal funds with estate funds, they can make maintaining an accounting for the estate much more challenging. The personal representative may also face financial liability to the estate’s beneficiaries or heirs if accounting reveals that the personal representative misappropriated estate funds. Consequences from inappropriately mixing personal and estate funds include potentially getting removed as the administrator or executor of the estate, financial liability to beneficiaries/heirs, or criminal liability if the personal representative intentionally or knowingly misappropriated funds.
Contact a Probate Attorney Today
When you’ve become the administrator or executor of a loved one’s estate, experienced legal counsel can help you understand your role and obligations and guide you through the probate and estate administration process. Contact Jones Gregg Creehan & Gerace today for an initial consultation to discuss how our firm can assist you in fulfilling your role as personal representative.