When acting as a representative for someone who has passed away, it is important to understand how to settle the deceased person’s affairs. The key to accomplishing this responsibility is opening and managing an estate account.
When someone passes away, all their belongings and assets become part of their estate. The executor must file and execute the decedent’s will, as well as pay the estate debts, the assets are distributed to the beneficiaries. Paying estate debts and taxes can be done with an estate account.
What is an estate account?
An estate account is an account held in the name of the deceased person’s estate for use in settling debts and expenses on behalf of the estate. To open an estate account, an executor must present to the chosen financial institution or credit union:
- a death certificate
- a letter of testamentary or letter of administration issued by a probate court
- an employer identification number (EIN) for the estate issued by the IRS
How does an estate account work?
An estate account can function as a checking account in paying for the expenses of the estate. They can even have dedicated checkbooks. Estate accounts are helpful in keeping the estate’s finances separate from the finances of the executor.
Executors can deposit any payments made to the estate or pay any estate debts using an estate account. Once probate is complete, executors can use the estate account to distribute the remaining funds to beneficiaries.
An estate account is a crucial necessity for settling and distributing the assets of an estate to debtors and beneficiaries. If you are listed as an executor or beneficiary for a loved one, it is important to become acquainted with the process of probate and an estate account, or considering using a living trust to avoid probate.