In this article we explain estate accounts for Illinois Probate. We answer the questions, “what is an estate account?”, “is an estate account always necessary?”, and “where should I open an estate account?” We also explain how to open an estate bank account and how to manage an estate account.
To learn more about estate administration generally, check out our article, Illinois Estate Administration Explained.
An estate account is a bank account used by an executor or administrator (known as the “personal representative”) to hold the assets of the deceased individual’s (“the decedent”) estate. The decedent’s own bank accounts will typically be closed down and the money in them transferred to the estate account. Estate expenses are paid out of the estate account. Ultimately, the assets in the account will be used to pay creditors, beneficiaries, and heirs of the estate.
An estate account is not always necessary to administer an estate. Small estates with few expenses, liabilities, and a simple asset structure can be administered without an estate account. However, even when not strictly necessary, an estate account can be a helpful tool to ensure that estate assets are not commingled with those of the executor and that estate transactions are easily tracked.
It is generally best to open up the estate account in the state in which the decedent resided. Because interest on the account will be taxed, opening an account in a different state may require you to file estate income tax returns in multiple states.
It often makes sense to open the estate account in the same bank as the decedent’s lifetime accounts. This allows the decedent’s accounts to be easily transferred to the estate account internally at the bank.
The first step to opening an estate account is to be appointed by the court as the personal representative of the estate. If there is a will, the person named in the will to serve as executor will typically file a petition to admit the will to probate. If there is no will, the beneficiaries will typically appoint an estate administrator who will file a petition to open the probate estate. To learn more about the probate process generally, check out our article: The Illinois Probate Process Explained.
When the probate estate is opened by the probate court, the judge will issue a document called “Letters of Office.” Letters of Office give the personal representative the legal authority to act on behalf of the estate, including opening an estate account and transferring the decedent’s bank account assets to it. Until letters of office are issued, the personal representative will not be able to access the bank accounts of the decedent.
Next, the personal representative should obtain a taxpayer identification number for the estate from the IRS. Instructions for doing so are on the IRS website.
Once you have obtained Letters of Office and a tax identification number, you can open the estate account by bringing a certified copy of the Letters of Office to the bank at which you intend to open the account along with a certified copy of the death certificate, the tax identification number, and a photo ID. If there are multiple executors or administrators they will typically all need to be present to open the account.
Depending on the amount you are keeping in the account, it may make sense to open up a savings or money market account in order to earn interest, in addition to a checking account.
Once the estate account has been opened, the decedent’s other bank accounts should be closed and the proceeds should be deposited into the estate account. The personal representative can deposit any checks that were issued to the decedent into the account as well. If real estate or other non-liquid assets are sold, the proceeds should be deposited into the account.
The estate’s expenses, including funeral expenses, should be paid from the account. After the personal representative has prepared a report of the estate’s assets and liabilities, the account should be used to pay any valid claims against the estate. The remaining balance should be distributed to heirs and beneficiaries according to the terms of the will or, in the absence of a will, state intestacy law. Be sure to keep good records of all such transactions.