When opening a probate estate or trust administration, the personal representative/trustee needs to open an estate checking account or a trust checking account, respectively. This account will receive the income earned and pay all the expenses incurred during the administration.
Running all of the income and expenses through one checking account will make it simpler to compile the accountings that the personal representative/trustee must report to the beneficiaries.
By having the CPA or attorney reconcile the monthly checking account, the accountings will be readily available when necessary. Accountings are usually provided at the end of the calendar year or at the end of the administration, depending upon the preferences of the beneficiaries.
In order to open a bank account for a probate administration, the personal representative will need to present a copy of the Letters of Administration (granting the personal representative authority to act on behalf of the estate), and a taxpayer identification number. The attorney’s office will usually assist the personal representative in obtaining the taxpayer identification number.
In order to open a bank account for a trust administration, the trustee should present a copy of the trust instrument indicating his or her appointment as successor trustee, the death certificate that serves to verify that the original grantor/trustee is no longer serving, as well as a taxpayer identification number.
If there is no probate administration and instead there is a trust administration, the trustee will simply use the trust checking account the same way that a personal representative would use an estate checking account.
The account can be opened in the jurisdiction where the estate administration is conducted or it can be opened in a bank branch near wherever the personal representative/trustee is located. It really doesn’t matter.
Surviving spouses often ask me whether they should close joint accounts. Especially when there isn’t a probate estate open, my general advice is to retain the joint accounts for at least one year. From time to time, the surviving spouse may receive a check in the decedent spouse’s name. Without a joint account to deposit the funds to, a probate might have to be opened just to take care of the check. The fees and costs of the probate don’t usually justify opening for a check or two, so otherwise the money would be lost.
Another common question concerns joint accounts—especially those with adult children. A client will often open a joint checking or savings account with a child with rights of survivorship or as a pay on death account to the child with the intent that the account be used for funeral expenses or such other expenses incurred immediately after death. The problem is that the child really has no legal obligation to use the account for those expenses, and could probably immediately tap trust assets for those purposes anyway. Further, the joint account circumvents the provisions of the will or trust that direct all assets be split among the beneficiaries in the stated percentages.
When an adult child asks what they should do with the account, I tell them that if their parent had them on the account for convenience purposes and not necessarily to take the account as their own, then they should consider abiding by their parent’s wishes and use the account as it was intended.
Another question is what to do with the automatic payments that are scheduled out of the account, such as mortgage, electric, and the like. If that regular account is closed and the payments still need to be made, then it will be important to remember to change those account setups before closing the old account.