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Why do executors need to open an estate account?

On Behalf of | Dec 2, 2021 | Estate planning |

Losing a loved one is never an easy event to go through. Even if the person’s passing was expected, time is often needed to work through the grief that this situation present. Still, when a New Jersey estate needs to close, it is important that the probate or estate administration process is started as soon as possible.

While these proceedings encompass many tasks, as the executor or representative of the estate, you will need to handle the remaining financial affairs. This area can be touchy for some families, which is why it is essential that you set up an estate account at a banking institution.

What is an estate account?

Because your loved one may have passed with uncashed paychecks, investment income or other financial avenues still generating income, you need a secure and separate place to keep these funds. By opening an estate bank account, you ensure that you have access to the estate funds and that already existing funds and incoming funds all have one place to go. In addition to depositing any new income for the estate into the account, you will also need to transfer funds from the decedent’s other accounts into the estate account.

Why is this account necessary?

As mentioned, the estate account will allow you to have all of the decedent’s funds in one place. It also gives you the ability to close the decedent’s existing bank accounts, which is also a step in the probate process. Additionally, it better ensures that none of the estate funds accidentally become mingled with your personal funds, which could put you in a troubling legal spot, especially if a beneficiary or other party associated with the estate accuses you of theft.

As the executor, you will use the estate funds to pay remaining bills, final tax returns and other liabilities. When the time comes to distribute the remaining estate assets and the beneficiaries and court have approved your accounting of the estate, you can take your payment from the estate account, distribute assets in accordance with the will and close the estate account.

Appropriate handling of funds

An estate account can essentially ensure the appropriate handling of estate funds during the probate process. This can prove beneficial to you as the executor and to the beneficiaries as you can provide record of your financial moves on behalf of the estate and the beneficiaries can feel secure in knowing that you are performing your duties properly.