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Depending on the size of the estate and the number of transactions that need to be made during the estate administration process, it can be very complex for the estate executor to manage all of the debts owed by the estate and funds coming into the estate from the liquidation of assets. In most cases, it’s recommended that executors open up an estate bank account – an account reserved solely for the financial transactions of the estate. An estate bank account is a temporary account used by the executor of a will to keep all of an estate’s funds in one account, helping to reduce the complexity of recording all transactions made by the executor on behalf of the estate.
It’s no secret that estate administration involves numerous transactions, which may include paying off the deceased’s credit card debt or selling their house. Having an estate bank account makes it much easier to account for all the transactions relating to the estate, ensuring that none of the estate’s assets are lost or left unaccounted for. Using an estate bank account allows the executor to directly deposit any proceeds from the sale of estate assets directly back into the estate, simplifying the asset liquidation process. Further cheques written out to the deceased can be directly deposited to the estate account by the executor. A single estate bank account makes it much easier for an executor to account for all the assets and cash of an estate, while simplifying the distribution process when the time comes to distribute the proceeds of an estate to its beneficiaries.
Once the estate administration process is finished and the executor is ready to distribute the remainder of the estate to the beneficiaries, the executor must provide a comprehensive account of all the funds that went into and out of the estate. Beneficiaries must approve of the accuracy and detail of this report before any assets can be distributed. In cases where a beneficiary does not approve of the account, they can request a passing of accounts, where the executor must prove all the transactions of the estate before the courts.
Having an estate bank account makes it very simple to account for all the transactions made. In the rare circumstance where the executor must prove the transactions in a passing of accounts, most bank institutions can provide a comprehensive account summary. The summary will be clear and exact in its description of when assets left the estate and when assets came into the estate.
In some cases, people have joint bank accounts with their spouses, this can complicate the process of differentiating between the estate’s assets and the spouse’s assets. Establishing how much of the joint account belongs to the deceased, and putting that amount into a separate estate account ensures that the joint owner will not be able to spend any funds that rightfully belong to the estate.
Additionally, estate bank accounts help to avoid the commingling of funds (mixing funds belonging to different people into one account) with the executor’s accounts. Without a separate estate bank account, it can be easy for an executor to accidentally use the estate’s funds for their own personal use. This creates personal liability concerns for the executor – estate bank accounts can help to minimize this risk.
An estate bank account is not a special bank account; the executor can simply open a regular chequing account with the bank under the name of the deceased. The bank will likely need to see the will and a death certificate to ensure that the person opening the account is an executor of the will. If there are multiple executors named in the will, all the executors must make decisions unanimously, so when cheques are written out of the estate bank account, all the executors must sign the cheque in order for it to be valid. Further, estate bank accounts do not have to be opened with the same institution that the deceased used prior to their death. It can be opened with any bank institution that the executor chooses. Executors can open estate bank accounts before the will has been granted probate in preparation for the administration of the estate.
While it may seem like additional work for an executor to set up an estate bank account, estate administration is typically more complex than one expects and having an estate bank account will be hugely beneficial to the executor in making their duties more straightforward. Having all the estate’s assets in one account will make it easy for executors to prepare accurate accounts of the estate administration transactions, while avoiding any risk of commingling of funds or complications arising from joint accounts.
If you’re an executor of a will and need help administering an estate, contact an experienced estate lawyer today. We can help to ensure that the will is executed properly and in a seamless manner.