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 April 22, 2022

How to Set Up an Estate Account

Woman setting up an Estate bank account.

If a loved one has passed and you’ve been named as the executor of their estate, you might feel intimidated by what that might entail—and everything you have to do. For now, let’s just focus on one aspect of being an estate executor. If you’ve been wondering how to set up an estate account, this article can walk you through the steps.

What is an Estate Account?

An estate account is a temporary bank account, often opened in the name of the person for whom you are the executor of the estate. The purpose of the account is to have a place to hold the estate’s funds while you take care of expenses, settle debts and taxes, and distribute funds to beneficiaries named in the estate’s Will. The account is temporary, and only used to hold assets for the purposes of settling up the deceased’s estate, paying off its financial obligations, and handling any expenses associated with probate.

Why Do I Need an Estate Account?

You don’t have to set up an estate account, but as the executor of the estate, learning how to set up an estate account can make it much easier to manage the estate—especially because you’re legally responsible for distributing funds and handling estate-related issues.

For example, managing funds through an estate account makes it easier to follow where the funds are going and how they’re being used, cutting down on the possibility that the money may be misused in some way by other people who might have access to a shared account. It also helps to keep estate funds separate from any other finances, including your own. Keeping estate funds separate from personal funds makes it easier for the executor to manage—which also makes managing estate taxes easier, too.

Lastly, if the deceased has expenses like mortgage payments or credit card payments, using an estate account to cover those costs can help you track those payments and ensure they’re handled properly. It will also help you to keep track of probate costs, and manage any incoming funds, if the deceased is still earning or owed money after their passing.

How Do I Set Up an Estate Account?

Now that you know why you should get an estate account, let’s walk through the steps of how to set one up.

Step 1: Get All the Documents You Need

Before you start the probate process, you’ll need to get your hands on some specific documents to present to the court. You’ll need a copy of the death certificate, and if there’s a Will, you’ll need to present that to the court as well. Each state has different requirements, so double check with yours what kind of documentation is needed before you go to court.

Step 2: Start Probate

Probate is the process in which estate assets are transferred according to the deceased person’s Will. If there’s no Will, you may have to go through some additional steps to apply to be the executor. This is when you’ll present the death certificate and a copy of the Will (if one exists) to state court, so they can name the executor of the estate. The only time probate isn’t needed to determine an executor is if the child of the deceased has been cited as a beneficiary.

Step 3: Set Up a Tax ID Number

In the event that you’ve been named the executor and decide to set up an estate account, you’re going to need a tax identification number specifically for the account. You’ll need to apply to the IRS to get an employer identification number—which is the same as a tax identification number—to simplify filing for taxes under the estate.

The bank will need this number to open the estate account, so make sure you have proof of the number when you go to the bank—and double check if they need any other documentation from you to open the account. Applying for a tax ID number is easy—you can even do it online through the IRS website.

Step 4: Open Your Estate Account

Despite the fact that you’re opening an estate account for someone who has passed, the process really isn’t that different from opening any other bank account—it won’t cost you anything extra, and all you have to do is fill out some forms. Often an estate account is just a basic checking account, but you might need to have additional accounts depending on how complex the estate is that you’re managing. You can discuss this with your banker and work with them to find the right solution for your estate.

Once the account is open, as the executor of the estate you’ll be able to deposit funds, make payments as needed to associated accounts, and then distribute funds according to the final Will. Once that part of the process has completed and all the debts have been paid, it’s likely you won’t need the account anymore, so you can work with your bank to close it when the time comes. Make sure you have the documentation the bank needs to close the account (this can also vary by state).

Have you been named as the executor of someone’s estate? Let LegalShield estate planning attorneys help you with the process—and make it easier for you. Estate management can be confusing and costly. A legal plan from LegalShield provides access to experienced lawyers at an affordable price, with consultation and assistance from a provider law firm. Sign up today!

Pre-Paid Legal Services, Inc. d/b/a LegalShield (“LegalShield”) provides access to legal services offered by a network of provider law firms to LegalShield members through membership-based participation. Specific limitations apply. See a plan contract for specific state of residence for complete terms, coverage, amounts, and conditions. The benefits described, including trial defense, are not available in all legal plans or in all states. Neither LegalShield nor its officers, employees or sales associates directly or indirectly provide legal services, representation, or legal advice (business consulting or business advice). This is meant to provide general information and is not intended to provide legal advice, render an opinion, or provide any specific recommendations. If you are a LegalShield member, please contact your provider law firm for legal advice or assistance.


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