Estate accounts are temporary instruments that hold estate money. In Washington, these are typically checking accounts, but can also be a savings or money market account. Once set up, executors can make payments, deposit incoming monies, make transfers, manage stock dividends, etc.
Here are reasons why you should consider having an estate account:
1. Create access to funds
Assets may get frozen after a taxpayer’s passing. To get to assets, the estate goes through estate administration and probate before the appointment of an executor.
If there is an existing estate account, it is easier to transfer frozen assets to the estate account.
2. Payments to the deceased get deposited
There may be incoming payments in the deceased’s name. With an estate account, the executor can endorse, deposit and use the payments as needed.
3. Easy record-keeping
In terms of taxes or other monetary obligations, an estate account allows payment and promotes the distribution of monies.
Executors want to avoid personal liability here. They must take care in tracking incoming and outgoing funds and recording all proper documentation required by law.
4. Protect estate assets
Having a potential executor jointly sharing existing bank accounts simplifies estate planning. This avoids the court freezing the asset.
The arrangement may aggravate beneficiaries as joint account holders can legally use funds as their own (joint holders are not held to the strict standards associated with estate accounts). These funds may also be at the mercy of creditors.
Prevention of commingled funds
Executors may not commingle personal funds with estate funds. Here, record-keeping is crucial. An executor accused of using estate funds to manage personal financials is subject to civil and/or criminal litigation and, without proper documentation, will have a difficult time proving innocence.
The estate account is ideal for managing estate administration and probate, reducing liability exposure and continuing estate management. It would be a smart move to investigate the benefits of estate accounts and joint accounts when estate planning.