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Estate Advisor: Estate Banking Bungles

In October 2017, Union County New Jersey (Estate) Surrogate James S ... He has held the professional designations of Certified Estate Specialist; Accredited Auctioneer of Real Estate; Certified Auction Specialist, Residential Real Estate and Accredited ...

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It’s hard to imagine settling an estate without the benefit of an estate trust checking accountAfter all, that’s where all the money goes: estate sale proceeds, uncashed paychecks, tax refunds, death benefits, and so onAlso, payments are made from the account such as professional fees, decedent’s debts, funeral expenses, taxes, and other itemsYou might be surprised how often that crucial account is sidestepped by executors.    There are circumstances in which ignorance on the part of an executor and/or a bank lead to missteps in setting up an estate trust accountIgnorance on the part of an executor might be forgivenAfter all, “Estate Executor” is an appointed position usually filled by a non-professional who might only perform the function once in a lifetimeIgnorance and bad advice on the part of a bank isn’t forgivable, though: those people are supposed to be professionals who deal with estate matters on a regular basisOne would think that a bank’s institutional support would be assumed in estate settlement cases, but apparently that’s not the case. Here are three common checking account missteps: (Disclaimer: my remarks are my own, and I claim no legal authorityIf you need estate advice, please see an attorney.) 1National bank policies may run contrary to state laws. In October 2017, Union County New Jersey (Estate) Surrogate James SLaCorte felt compelled to issue a press release on the problem, stating: “Recent events concerning Bank of America, Chase and Wells Fargo Banks compel me to warn residents that (they) may confront severe problems when they attempt to manage their deceased loved ones assets at the time of their deathChase Bank has displayed in the recent past a refusal to follow New Jersey Law and instead follow their own bank instituted policy which adds expense and delay to the orderly processing of the decedents estatesBank of America and Wells Fargo have acted in a similar manner on many occasions.” How is such conduct explained? The legal staff of a national bank may be located in another state, and takes a “one size fits all” approach to the development of their bank’s estate trust policiesLocal branch managers don’t have the authority to change policies, even when they conflict with State lawThis situation results in frustration and delays for executorsA solution? Executors should choose a bank that is convenient for them, even if it’s a national bankVisit the bank, and present the papers giving authority to open an estate accountIf the bank won’t accept the authority, find a local bank that is more familiar with your state’s requirementsIf a local estate attorney or CPA is hired as soon as an estate is opened, they can likely recommend a suitable bank. 2Payable on Death (POD) accounts may backfire. There is a persistent myth that a “Payable on Death” account will enable a testator to avoid probateSuch accounts designate a beneficiary who may claim the proceeds of an account upon the death of the account ownerPOD accounts may also include funds in certificates of deposit and brokerage accountsWhen funds are withdrawn, the accounts are usually closedThe problems with POD accounts are threefold: The disposition of such accounts may run contrary to the decedent’s will. The executor may be left with no money to initiate the estate closure or pay funeral expenses. There is no legal obligation for a beneficiary to share the money with siblings, and lawsuits and/or delays may ensue. Solution? A small (enough money to cover final expenses and hire an estate attorney) POD account makes sense if the account beneficiary and executor stated in the will are the same person. 3Joint checking accounts can’t function as an estate checking account. Joint accounts are commonplace among seniors in nursing homes or assisted living facilitiesIn such cases, the joint account holder is a relative or trusted friend of the primary account holderWhen the account primary dies, the deceased’s name is removed from the account and the remaining funds belong solely to the surviving account holderEven in cases where the survivor is the estate executor, such accounts are completely inappropriate for estate business for the following reasons: Money coming into the estate can’t be deposited, because the name on the checks (the deceased) doesn’t match the name on the account (the survivor). Spending estate funds on personal business, or combining personal and estate funds (comingling) is an accounting nightmare and may lead to claims of mismanagement by heirs or an audit by the IRS. If the surviving account hold and the estate executor are not the same person, disagreements and lawsuits may ensue. There are no shortcuts to properly setting up an estate trust checking accountThe first step that a newly appointed executor should take is to hire a local attorneyAn attorney’s role is to advise and guide an executor through the estate settlement process, which may include making banking recommendations. Wayne Jordan is a Virginia-licensed auctioneer, Certified Personal Property Appraiser and Accredited Business BrokerHe has held the professional designations of Certified Estate Specialist; Accredited Auctioneer of Real Estate; Certified Auction Specialist, Residential Real Estate and Accredited Business BrokerHe also has held state licenses in Real Estate and InsuranceWayne is a regular columnist for Antique Trader Magazine, a WorthPoint Worthologist (appraiser) and the author of two booksFor more info, check out Wayne’s website at or visit Wayne’s blog. 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