Say you have been doing a little estate planning, you might have thought about making your planned executor of your estate a joint account holder on a current financial institution accounts. Or, when you’ve been named the executor of an estate, it could seem better to just open a separate financial institution account in your name to assist with your responsibilities in dealing with issues.

Nevertheless, in each case, utilizing an estate account is the better way to go. Below is why.

What Is an Estate Account?

An estate account is a financial institution account in the name of the estate. It’s meant to act as a temporary financial institution account to hold the estate’s funding while an executor deals with daily matters associated with managing the estate, like paying liabilities and, at then of the day, allocating the assets in the estate to the beneficiaries of the deceased.

An executor needs to provide the financial institution with the required documents to open an estate account, in which typically includes death certificate. The executor also must apply for an employer ID number for the estate.

Reasoning for Opening an Estate Account

Whereas foregoing an estate account may appear to be more efficient, there are 5 good reasons why an executor needs to open one.

Easier accessibility to the deceased’s funds.

When a taxpayer passes away, their assets are usually frozen. To access those frozen assets, the estate is required to be opened in probate and an executor named. Since an estate account is in the estates name, it is a lot easier to transfer these formerly frozen assets into the estate account, whereas the executor can have handy access to the funds for the management of the estate.

Deposits of disbursements made to the deceased.

The executor is usually in receipt of checks in the deceased’s name, in payment of the amount owed to the deceased when they were still living. The estate account makes it easier for the executor to sign and deposit those payments.

More simple record keeping for tax and other objectives.

Avoidance of co-mingled funds.

Safeguarding of estate assets.

If you’re doing estate planning, making your planned executor a joint account holder might seem convenient. Yet, it poses risks. If one joint account holder passes away, the other gains sole access to the funds. This unrestricted access raises concerns for your beneficiaries, as the surviving holder could use the funds as their own. Moreover, assets in the joint account become vulnerable to claims from the surviving joint account holder’s creditors.

Whereas opening an estate account may appear like a complex, needless step for an executor, it’s actually the perfect device for management purposes and helps decrease an executor’s accountability exposure.

Moshier Law Offers Estate Planning in Scottsdale, AZ

Our estate planning lawyer in Scottsdale can help with Wills, Family Trusts, Power of Attorney, Probate, Guardianship, and Conservatorship. Give us a call today for a free consultation.