Even after someone dies, they may still be earning money. Rental income, royalty checks, final paychecks and other income may flow into the estate or the decedent's trust. It's the job of the estate executor or trustee, collectively referred to as "fiduciaries", to manage this process. An executor is someone responsible for winding down the deceased person's estate, and a trustee is the person controlling and managing a trust. Among their other responsibilities, executors or trustees must deposit any checks that come in. As a result, one of the executor's first jobs is to set up a bank account for the estate.
An executor managing someone's estate after their death must obtain a tax ID number and open an estate bank account, taking care to endorse, handle and segregate estate assets appropriately.
Opening an Account
An executor must file with the IRS to give the estate a tax-identification number. The executor will need this number to open the bank account. A successor trustee does the same thing when assuming control of the trust. The account should be a checking account so the fiduciary can draw on it to pay expenses. It's best to open the account in the decedent's home state rather than the executor's state to avoid the need to file state income tax returns in multiple locations.
Checks to the decedent still need an endorsement, despite that fact that the beneficiary of those checks obviously is unable to provide one. Federal financial regulations say the executor can legally endorse checks redeemable for cash, or written to pay for goods or services. A typical endorsement would be "John Smith by Fred Jones, executor of John Smith's estate." For a trust, the endorsement would be along the lines of "John Smith Trust, Fred Jones Trustee."
Depositing the check is one thing, but cashing it is more difficult. Even though the fiduciary has the authority to manage the money, the bank may object to the executor seeking to cash checks made out to the deceased. If the executor takes out cash, it's much harder for anyone to track how it's spent. That makes it easier for the executor or trustee to breach their fiduciary duty, and the bank may be wary about its own risks under such a scenario.
Cashing a check and pocketing it isn't in the fiduciary's best interest either, even if the check is made out to the executor or trustee. One of the worst mistakes a fiduciary can make is to commingle funds, mixing their own money with the estate or trust's. Even if there's no fraud, it may look very bad to the beneficiaries, and to the probate court. All checks should go into the estate account, even if that requires securing them somewhere until the account is open.