Estate Account in a New York Estate

Do I Have to Open an Estate Account?

Opening an estate account in New York is required in most cases. The estate account serves as a repository for the deceased's assets before they are distributed to the rightful beneficiaries. Regardless of the estate's size, opening an estate account is a prudent decision. Executors and administrators are prohibited from mixing their personal assets with those of the estate, and an estate account provides the most effective safeguard against commingling. Moreover, an estate account simplifies the process of accounting to beneficiaries and expedites the closure of the estate.

How Do I Open an Estate Account?

When an estate has cash and assets (that can be sold and liquidated to cash), the fiduciary must obtain an Employer Identification Number (EIN) from the IRS. The EIN functions as a social security number for the estate entity and is essential for opening a bank account in the estate's name. To open the estate bank account, the fiduciary will need to provide the EIN, certified letters testamentary or of adminsitration, and a certified copy of the death certificate.

Executors or administrators often rush to open an estate bank account, thinking that unclaimed assets will automatically go to the State of New York by escheat. But this is not true. Escheat only happens when there is no heir to inherit in accordance with law. Instead, after a year of no activity in the deceased's bank account, the banks move the money to New York Unclaimed Funds, which is managed by the Office of the Comptroller. Getting money from Unclaimed Funds takes longer, usually 90-120 days, as opposed to getting it straight from the bank withiin 1-2 days, for as long as you have the letters. To prevent the money from going to Unclaimed Funds, your NY estates lawyer can apply for preliminary or temporary letters, despite ongoing probate litigation such as will contests that could delay the issuance of the regular letters testamentary or administration.

Managing an Estate Bank Account

A fiduciary's primary responsibilities include collecting assets, settling debts, and distributing the assets to the decedent's beneficiaries or heirs-at-law. Before distribution, the fiduciary must pay ordinary and necessary expenses using the estate bank account. These expenses may include monthly mortgage payments, co-op maintenance charges, junk removal, utilities, decedent's debts, taxes, legal fees, and other essential costs related to the estate or estate property.

All withdrawals and payments must be properly accounted for. Prior to distribution, our law firm prepares an informal accounting based on bank statements and receipts provided by the fiduciary. This document itemizes all collected assets, paid expenses, fiduciary commissions due, legal fees, and the final distribution amounts owed to the heirs or beneficiaries named in the will. The accounting is then circulated to the parties for review and approval. If any beneficiary or heir has serious concerns about the management of the estate bank account, it may lead to a judicial accounting, which is a time-consuming and costly process.

When withdrawing funds from an estate bank account, it is crucial to minimize cash withdrawals. While paying in cash may sometimes be unavoidable and cost-effective, such as when hiring a local handyman or cleaning lady, it is best practice to maintain a paper trail by paying by check or obtaining an invoice to substantiate cash withdrawals. Fiduciaries often encounter problems when they withdraw advances of their inheritance and/or executor commissions from the estate bank account. It is strongly advised not to withdraw any advances without first consulting with your NY estates lawyer. Additionally, if you receive notices of any debts owed by the decedent, consult with your NY estates attorney to ensure that only legitimate debts are paid.

Closing an Estate Bank Account

Depending on the estate's value, it is advisable to maintain a contingency fund in the estate bank account for a period of one year following the distribution of assets. This fund serves as a safeguard against any unforeseen liabilities that may emerge during this time. The size of the contingency fund should be proportional to the overall value of the estate.

If you require expert guidance in estate planning matters, the Law Offices of Albert Goodwin, situated in the heart of Midtown Manhattan, New York, NY, is well-equipped to provide you with tailored solutions. You can call us at 212-233-1233 or send us an email at [email protected].