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Thursday, December 2, 2010

How and when to set up an estate bank account

Most executors and administrators of estates will at some point set up a bank account for processing financial transactions on the estate. Even when an executor or administrator has hired a lawyer to apply to the court for probate or administration, he usually still has to set up an account. The alternative is to run all transactions through the lawyer's trust account, which becomes expensive.

When the account is opened will depend largely on whether you are an executor (i.e. appointed by a valid will) or an administrator (i.e. appointed by the courts in the absence of a valid will). An administrator has no authority whatsoever to take charge of the deceased's money until he or she is appointed by the court. In other words, he or she can't open an account until the court provides them with a document putting them in charge.

If you're an executor, however, you can open the account at any time once you take charge of the estate. Your authority to do this comes from the will, not the probate. The name on the account should make it clear that this is not your personal money and that you are holding it in the name of the estate. If the deceased is John Smith and you, the executor or administrator, are Mary Smith, the account should be called either "The Estate of John Smith" or "Mary Smith, Executor of the Estate of John Smith".

Executors usually don't wait for the court to issue a probate document before opening the account. While the probate application is being processed, you, as executor, will usually apply for the CPP death benefit, collect any outstanding wages, benefits and refunds, and pick up any cash lying around the deceased's home. All of those things and more may be deposited into the estate account before the grant of probate is issued. As time goes on, you will add other assets to the account, such as when you cash in GICs, sell the deceased's home or transfer over the proceeds of the deceased's bank account.

If you receive cheques made out to the deceased person, they don't have to be re-issued to the estate. They can be deposited to the estate account as they are.

37 comments:

  1. Great article. Do you mind if I place your article on my blog and reference your site to it?

    Cheers,
    Larosabelle

    ReplyDelete
  2. Hi Larosabelle,
    Thanks! Please go ahead and post it. By the way, I checked out your site and it's really unique and interesting.

    Lynne

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  3. Is this a special category of account at the bank or can one just open a regular bank account with the name on the account as you've described above. My mother's will has her 3 children as executors. I'm assuming all 3 should be signatories?

    Marsha

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  4. Hi Marsha,
    The account you need is just a regular chequing account. Yes, all executors' names must be on it. All decisions of joint executors must be made unanimously, so all three will have to sign all cheques.

    Lynne

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  5. I attempted to open an estate bank account along with my co-executor and was told I would have to wait until the Court issues the probate letters. Are there restrictions or did I just draw an uninformed bank employee?

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  6. My recently deceased mother had create a trust through Wood Gundy for my daughter to help her through university. The trust now holds $75,000. As the executor I am just starting the estate work. Does this trust belong to my daughter, or is it part of the estate, and therefore to be caught up in limbo during the probate? Does my daughter have to pay taxes on this as income for the year? If so, it will pose quite a hardship on her as a student. My mom's estate is about $325,000 cash, which is being managed by Wood Gundy. Please advise.

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  7. I am the executor to my deceased elder sister's estate. I just received a cheque refund (a small sum of less $100) issued to her estate. My question is, do I need to apply for a probate grant before I go to a financial institution to open an estate account? Or I could simply present a copy of the Will to the financial institution that I am the executor? Please advise

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    Replies
    1. No, you don't have to wait for probate. Take the will, a copy of the death certificate (or funeral director's statement) and your I.D. to the bank and they should open the account with no problem. Your authority comes from the will, not the probate.

      Lynne

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  8. My dad passed away and has no will, no assets, no liabilities, no bank account. I am an only child. Received his last Canada Pension cheque, issued in the month of his passing but am unable to cash it. Can I open an estate account and deposit his cheque into it. What do I need to do to prove that I am the only beneficiary?
    thanks.

    ReplyDelete
  9. My mother-in-law passed away one month ago, she was in an assisted living apartment. She had no assets other than a savings account. Our lawyer said there was no need to probate as the will clearly spells out who the beneficiary is and there is only the savings account which would be used to pay expenses and the rest to the beneficiary. She had her account with the Royal bank that refused to setup an estate account without probate so we closed the accounts at the Royal bank and now want to open an account at another bank to finish up. Other banks are also refusing to open estate accounts. We have cheques to deposit, but don’t know where to put them now. Can we just deposit the cheques in our own account? There are only two cheques to deposit and she never paid taxes, only received refunds due to low income.

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  10. Royal bank will not allow me to open an Estate bank account, without a probated Will. The other financial company with all the investments left, did not require probate and it was a significant sum.

    What are the alternatives if a bank will not open an estate bank account without probate? Lawyer Trust account and then endorse deposits to it and then disburse through it?

    Look forward to some feed back and thanks.

    ReplyDelete
  11. Well, I posted the above,on July 16tth along with the other person who also had issues with Royal bank on July 8th.

    I have since gone to CIBC and they had no issue with helping me without probate.

    I opinion, you don't go to RBC if you have a non-probated Will. Waste of time.It takes sometimes up to a year or more to probate a Will, but bills need to be paid before that. THe big risk is, if a testamentary trust is involved, as there are deadlines that might be missed and taint the trust.

    Hope this helps others who deal with RBC regarding non probated wills.

    ReplyDelete
  12. Hi,

    I'd like to know if it is absolutely required for an estate account to be made.
    My grandmother passed away and there are only two beneficiaries, my mother and I. What is the harm of just dividing the money between the two of us and paying the last few estate bills from our own accounts?

    ReplyDelete
  13. Is there a time limit on how long an estate account can stay open? I am executor for an estate of someone who lived and died in Alberta. I opened an estate bank account in BC where I live.

    ReplyDelete
    Replies
    1. No, there is no time limit specified anywhere. However, keep in mind that as an executor, your obligation is to wind up the estate as efficiently and quickly as possible. The money belongs to the beneficiaries, and they have every right to insist that you disburse it (once taxes and bills are paid, of course). Keep the concept of the executor's year in mind. If you haven't wound up the estate in a year and there is no good reason for it, you could end up in a dispute with the beneficiaries and possibly in court.

      Lynne

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  14. I am the executor of my uncle's estate. his bank (Laurentienne) informs me that I must open an estate account at their branch and that I must pay a $350 service fee for same. My bank, BMO, charges nothing for an estate account. Can Laurentienne refuse to transfer the funds from my decesased uncle's account to BMO?

    ReplyDelete
    Replies
    1. I'm not aware of anyone charging a fee of $350 for an executor's account either, so I can't explain the rationale behind it.

      As long as you have properly been appointed by the will as the executor, then the bank must release the funds to you.

      Lynne

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  15. I am sole trustee on an estate, appointed by Superiour Court (Ontario). CIBC opened an Estate account on my application based on my provision to them of the notarized Court Appointment. CIBC requested personal ID documentation for each and every beneficiary on the account which I supplied although I was hesitant to believe the Money Laundering Act actually requires it. CIBC are certainly entitled to require my ID as sole trustee. All the estate assets have since been liquidated and deposited to the CIBC estate account, and now CIBC has locked the funds and is refusing to distribute the funds until such time as each and every beneficiary appears at a branch of CIBC, identifies themselves with the previously provided ID's and signs the account application. As trustee, I am unable to distribute or transfer the funds of the Estate. I have dealt with two CIBC staff and have been promised a CIBC Manager but no Manager has yet contacted me.

    Is CIBC correct in making asserting they are making lawful requests identification of beneficiaries and for requiring each and every beneficiary to appear at a CIBC branch, identify themselves and completing account application forms?

    ReplyDelete
  16. my father passed away and only had $960, which was held in trust by an organization. My father was a street person, so they helped to budget his money. They gave me a cheque for that amount made out to the estate of my dad. My dad had no will, no spouse and i am his only child. Will i need a letter of administration to open an estate account or will my bank let me sign a letter of indemnity?

    ReplyDelete
    Replies
    1. Hi Bob,
      I would be very surprised if the bank did not allow you to sign a letter of indemnity under the circumstances. Their concern is allowing money to be paid to someone, then finding out later there were other beneficiaries that should have been included. Given that there was no will, no spouse, and no other children, the chances of anyone else appearing are next to nothing. Make sure the bank realizes that this is the only asset of the estate.

      Lynne

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  17. If the executor is the beneficiary can they then use the estate funds for personal since all financial obligations will come to them anyway?

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  18. Hi Lynne,

    If the executor is also the beneficiary do they get access to the funds right away since the financial obligation will come to them regardless?

    ReplyDelete
    Replies
    1. An executor can never use estate funds for personal spending. Ever.

      The executor must wait along with everyone else for the estate to be wound up to get his or her inheritance.

      Either you are mistaken about the financial obligations of an executor, or I'm reading your question incorrectly. The financial obligations of an estate do not "come to" an executor personally. The debts of an estate are paid only to the extent that the estate (NOT the executor) has the funds to pay them.

      So, yes the executor does have access to estate funds right away, but no, a beneficiary does not. When they are one and the same person, the executor must only use the estate funds to pay estate costs and debts. Doing otherwise is theft or fraud.

      Lynne

      Delete
  19. T. O'Hearn, OttawaAugust 9, 2014 at 4:34 AM

    How long should it take for a bank to open an estate account? My mother passed away in April, and I met with her bank on April 26 primarily to be sure no further deposits were made. I also wanted to be sure her remaining bills were paid (less than 1K).

    In July I received a notice from one company that the account had been sent to a collection agency. I informed the branch manager, who did pay her outstanding accounts directly. On July 21, I escalated my complaint to that bank's ombudsman. I was advised around that time by the branch manager that an account estate should be opened by the first week of August.

    It is now August 8 and there is still no estate account. Her affairs are simple and the estate is modest. I am her executor and sole beneficiary. No probate is required. I think I have been reasonable, but am now also very unsatisfied by the response by the ombudsman's office and told them that when they called yesterday to 'loop back' on my complaint.

    In reading their most recent annual report, the office of the ombudsman outlines the complaint process and time for resolution. Their process says I should have received a written agreement that is to be signed and returned to them. I have not received anything in writing other than a few emails. They also commit to resolving complaints within 90 days, which would take the matter to the end of October. I don't need the money but want this to be resolved. Every time I get another unsatisfactory response causes more stress at an already difficult time. Any advice you may be able to offer would be appreciated.

    ReplyDelete
  20. Hello Lynn,

    Is an executor allowed to pay expenses out of the estate account prior to probate being granted? My financial institution says that they are not allowed, but will make concessions for burial costws and probate application only. My father's house needs to be sold, we have to keep hydro on. What if there was a mortgage on the property (there isn't). I am just not sure how this is supposed to work?? Does the executor pay out of pocket?

    I would really appreciate your help.

    ReplyDelete
    Replies
    1. Your bank is doing what any bank would do in the circumstances. You have to remember that although the executor has an obligation to look after the house, the bank does not. Their job is to hand over the account once probate has been granted. The probate is their indemnity against the deceased's funds to the wrong person. As far as the bank is concerned, your father's account is still HIS account and not an estate account until the probate has come through.

      Paying out of pocket should be the last resort. Use any other estate funds you have been able to gather, such as the CPP death benefit or the sale of household contents. Just be sure to keep detailed records of what came in and how you used the funds so that you can explain it all later.

      Lynne

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  21. My mother was killed suddenly and although she requested I be her executor she neglected to sign her will properly. My three sisters and I are the beneficiaries, however my mother had no assets and lived with us. I have just received her CPP funeral benefits paid to the estate as we were unaware her will had not been signed correctly until after the funeral. How do I go about cashing this in to divide amongst our family?

    Tammy

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  22. Can the estate lend money to the executor who pays interest on it to the estate at the same rate the money is now receiving in a GIC? The executor is also a 50% beneficiary of the estate and the amount of the loan is less then 15% of the value of the estate. The loan would be repaid with interest before the final disbursements.

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  23. My Dad just died and he had 2 bank accounts with myself as co-owner with right of survivorship. If I open an estate account and deposit the funds from both accounts(100,000) dos that account have to be probated?

    ReplyDelete
    Replies
    1. Yes, I would expect that you would have to obtain probate to deal with the account, due to the high dollar value. The problem with joint accounts between parents and kids is that the banks are really inconsistent in their treatment of them. In my view, you are doing exactly what is supposed to happen - even though the accounts are in joint names, you are treating the accounts as assets of the estate. This is what the law says you are supposed to do. As I said, not all banks are responding properly to the change in the law (from 2007) and some are paying out joint bank accounts between parent and child to the child. They will continue to do this until a beneficiary sues them. I doubt you want the estate you're working on to be that case, so you are acting properly. Because these accounts are assets of the estate, you will have to get probate to distribute them.

      Lynne

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    2. If you are a co-owner with right of survivorship then the assets become yours automatically upon death and are not part of the estate.

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    3. That is not the law any longer, when we are talking about inter-generational accounts. The only reason that some banks are still paying out joint accounts to the kids is that nobody has sued the banks yet. It'll happen. Then all of a sudden none of the kids will get the joint accounts any more.

      Lynne

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  24. Why is the bank refusing to add my name as the administrator to my sister's estate bank account?‏ It's already hard enough losing a loved one but to not be able to manage her estate on behalf of her son is difficult when I've been appointed by the court and provided the document to the bank. There is still estate activities going through her bank account and I recently switched her mortgage company. The new mortgage require the pre-auth form to be from an account with my name as the administrator to my sister's estate. But the bank refuse to do this. I want to ask my question to the bank but can I get your consent first? I would like to reference your site to them. Please let me know.

    ReplyDelete
    Replies
    1. Your question is why the bank is refusing to add your name to an estate bank account. If you are the administrator, who has set up the estate account?

      Is the account actually an estate account, or is it simply your sister's account that was in place at the time she died? If it is simply her account, then you need to close it and open an estate account in your name as administrator. You can't just add your name to an existing account, as that would suggest that your sister is alive and you two are joint owners, which obviously cannot be the case.

      This is the only thing that makes sense to me in the context of your question.

      Lynne

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    2. Let's say my sister's name is Jane Doe and I'm Sara Smith. My sister had a chequing account and she passed away without a will 7 years ago. When the court appointed me as the administrator, her bank account changed from Jane Doe to Estate of Jane Doe. Currently, I'm asking the bank to add my name by changing the account to Sara Smith, Administrator of the Estate of Jane Doe and they said no. I asked if i can close the account and open one that says Sara Smith, Administrator of the Estate of Jane Doe and they said no. I went to another bank and they also said no. I was told I would have to open a personal account in my name. So i'm very confused.

      Delete
    3. I think your bank is making an error. You were correct when you suggested an account set up as "Administrator of the estate of Jane Doe". Working with banks can be tricky, because they don't offer their employees much training with respect to estates. I know this because I spent 7 years at Scotiabank doing whatever I could to help out the front line staff dealing with estates. If the person you're dealing with cannot do as you ask, try talking to the branch manager. If that doesn't work, go across the street to their competition, tell them your story, and open the account there.

      Lynne

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  25. My sister and I are co-executors of our fathers will. We are also the only two beneficiaries. My sister lives in the same province as my deceased father. When the final payouts are made after the tax clearance certificate is received. Will I have to fly to that province to sign the cheques or is there something that is sent to the bank to release the cheques with only one signature?

    ReplyDelete

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