Once you have been appointed executor 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 this way, or something similar: “Estate of Gerald S. Smith, Deceased, Pamela S. Smith, executor.”
What Kind of Account to Open
You’ll want an account that allows you to write checks, so you can pay the deceased person’s final bills and court costs and eventually distribute monetary gifts to beneficiaries. Which kind of account is right for you depends on your circumstances.
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.
Don’t open an out-of-state account. If you live in a different state than the deceased person did, you may be tempted to open an estate account close to you instead of where the person lived. Don’t do it. If the estate earns income in your state, you may have to file a state tax return for that state, too.
Getting a Taxpayer ID Number From the IRS
To open any bank or investment account, you’ll need a taxpayer ID number for the estate, which is itself a taxpayer. You can apply for an ID number online, at www.irs.gov. You need to complete a simple form with a confusing title: IRS Form SS-4, Application for Employer Identification Number. Obviously, you’re not an employer, but nevertheless this is the form you need.
You can also get a copy of the SS-4 form from Social Security offices or post offices. Fill it in and then either call the IRS (phone numbers are listed on the back of the form) or mail in the form. If you mail in a paper form, you should get your ID number (EIN) back in about four weeks. If you call, the IRS will assign a number over the phone that you can use immediately. You’ll still need to write that number on the SS-4 form and mail or fax it to the IRS.
Using the Account
Once you’ve opened the account, transfer the funds from all the deceased person’s bank accounts to it. (But don’t touch payable-on-death accounts, which go directly to the named POD beneficiary and are not part of the estate, or 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 to pay debts, taxes, and expenses of administration, such as probate court filing fees, and lawyer or other professional fees.
Keep good records of every transaction. When you deposit money, note the amount, date, and source in the checkbook. (If there’s not enough room, keep a separate ledger.) When you write a check, put down 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 obligations. Any new accounts you open should, of course, be held in the name of the estate.
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, be sure to get a receipt and put it in your files. And when you reimburse yourself from the estate account, note exactly why.