After you pass away, your bills and debt unfortunately do not leave with you. This means that these debts will still have to be paid. Additionally, it is likely that your death will actually garner you more unwanted expenses, as the probate court process can be costly and the fees will need to be paid for.
Trust & Will, a leader in online estate planning, knows that these can be questions that you wish you could avoid. It can be scary to ponder about your eventual death, as we often do not want to think about our own mortality. However, what happens after your death is not a conversation that you will want to put off for too long. All too often, estate planning is left on the back burner, leaving grieving family members with the task of trying to figure out how to handle end-of-life medical decisions and locate and distribute the deceased’s assets and treasured family heirlooms.
You can never know what the future may hold, but you can do your very best to plan for it. That is why in this article, we will cover estate accounts and what can be paid for using the funds held in your estate account after you pass away.
Keep reading to learn the answers to the following questions:
What is an estate account?
How is an estate account created?
How do you use an estate account?
What debt can be paid off using your estate account?
What can you do in advance to shorten the need for an estate account?
What is an Estate Account?
An estate account is a bank account that is opened after someone passes. Some of the financial assets of the deceased are put within an estate account after they pass away in order to help pay off their debts. Once the account is opened, the Executor, or a court-appointed administrator, is permitted to use the funds held within the account for debts. Your Executor is a chosen individual who you have appointed to take care of your estate after your passing. The account can also be used to distribute the remaining funds to the designated Beneficiaries as recorded in the Will.
Estate accounts are beneficial because often the probate court process can be lengthy and costly. During the probate process, all assets, once settled, are distributed to the Beneficiaries. Until the estate has been settled in probate court, the assets are in limbo while it is determined who the Beneficiaries are. However, debts and bills do not stop during this time. Thus, an estate account allows the Executor, or court-appointed official, to be able to continue to make the necessary payments on behalf of the estate.
How is an estate account created?
An estate account is created by either your Executor or a court-appointed administrator after your passing. It is important to note that your estate account cannot be created before your passing. Thus, your Executor or court-appointed attorney must provide a list of documents to prove the legality of opening up an estate account. To open an estate account, they will need the deceased’s:
Death Certificate
Employee Identification Number
Social Security Number
Financial Accounts
How do you use an estate account?
Once an estate account is created, the Executor or court-appointed attorney does not have free reign to use the account on whatever they please. Instead, they must submit a claim report to the court explaining the amount that they will want to take out of the account and what it will be used for. This helps to ensure that your assets are protected at all times throughout the probate court process.
What debt can be paid using an estate account?
When it comes to the things that your estate account can be used to pay for, the list is fairly strict. Your Executor or court-appointed administrator is only allowed to use your estate account to pay off outstanding debts, as well as any debts that are acquired in the probate process. As far as your debts that can be paid off, this can include items such as:
Remaining mortgages
Loans
Utility bills for your home (before your home is passed on to your Beneficiary)
Taxes
Car payments
Credit card debt
Lawyer fees for probate court
What can you do in advance to shorten the need for an estate account?
estate accounts are only necessary for as long as it takes for the probate court process to be completed. The best thing you can do to shorten the probate court process is to create a comprehensive Estate Plan. When you create a thorough Will, added time is not needed to determine who the rightful Beneficiary should be, as you will have already designated your Beneficiaries in your Will. This will help shorten the probate time frame and make for a smoother process. Additionally, when you create a Trust, you will be able to bypass the probate court process entirely because your assets and named Beneficiaries will already be listed within the Trust.
If you would prefer to lessen the need for an estate account and increase the amount of money you can leave to your loved ones, it is best to settle your debts before you pass away. If you are capable of paying off all mortgages, loans, and credit card debt while you are alive, you will be able to save your family money in the long run.
Discussing your Estate Plan can be challenging, as it forces us to face the reality of our own mortality and ask questions that may make us uncomfortable. However, the process of creating your Estate Plan does not have to be long and arduous. At Trust & Will, our team has made it our goal to design an easy-to-navigate online estate planning website that will provide all of the state-specific estate planning documents you need to create a customized Estate Plan. Whether you need to draft a Will, Trust, Nomination of Guardianship documents, or any other estate planning document, Trust & Will can help you get it done right from your computer. If you are unsure where to start, we even offer a free online quiz to point you in the right direction. Get started today!
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