Acting as executor or administrator of someone’s estate involves wrapping up all the details of his debts, taxes and property. Opening a bank account for the estate usually is a must. Closing the account is one of the last steps of the probate process, and usually can be accomplished without fuss.
The Estate Account
People sometimes die with uncashed checks in their possession, or with money owed to them, such as paychecks. The estate’s executor must open a bank account to accept and hold this money. She also should close any other bank accounts in the deceased’s name and move the money into the estate’s account. The account also receives dividends, interest from investments or other income that may be paid to the deceased while his estate is in probate. If the estate owes significant debt, the executor may have to petition the court to sell or liquidate the deceased’s property. The proceeds from these sales would go into the account as well.
The estate account can’t be in the name of the deceased, because his Social Security number is no longer valid after death. The estate account requires its own tax identification number, which the executor must apply for with the Internal Revenue Service. When the executor opens the account, she gives herself the right to sign checks and authorize transactions, usually by signing “Estate of John Doe, Jane Doe, Executor” or something similar.
The Probate Process
The money in the estate bank account doesn’t necessarily go to the deceased’s beneficiaries. The executor has access to this money during the probate process so she can pay the deceased’s debts, as well as any taxes owed by him or the estate. She also must pay the expenses of operating the estate, such as court filing fees or professional fees for an attorney or accountant. Depending on the size and complexity of the estate, it’s possible that the executor might deplete the account by the time probate closes, or the account may hold just a little cash by the end of the proceedings.
Closing the Estate
When all the deceased’s financial obligations and tax liabilities have been paid, the executor can close the estate and make distributions of all remaining property to his beneficiaries. The exact process for this differs according to state law. Most states require that the executor first prepare an accounting, showing all money the estate took in and everything she paid out for debts, taxes and expenses, as well as documenting what property or money is left. The estate’s bank account would appear in the accounting as an asset of the estate, its balance confirmed by the most recent bank statement.
If all the beneficiaries approve and sign off on the accounting, this is sufficient in some states and the executor can then close the estate and make distributions. Otherwise, the executor must usually ask a judge to approve the accounting and give her an official court order allowing her to close the estate.
Closing the Bank Account
Closing the bank account typically is the last step after the court or beneficiaries have approved the executor’s accounting and the estate is ready to close. There may be a few final bills requiring payment, such as compensation to the executor for her services. When everything is paid, the executor can close the account, usually without specific court approval for this final step. She then can distribute any money that remains in the account to the beneficiaries, according to the terms of the deceased’s will.