Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for guidance on your specific situation.
Detailed Answer
Under Michigan law, when a person is appointed as a personal representative (commonly called an executor), that individual must gather and manage the decedent’s assets for the benefit of creditors and beneficiaries. One of the most fundamental duties is to segregate estate assets from personal funds. Opening a separate estate bank account is the most reliable way to do this.
Michigan’s Estates and Protected Individuals Code (EPIC) grants the personal representative the authority to collect assets, pay debts, and distribute property. Specifically, MCL 700.3702(1) provides that a personal representative may “receive and preserve the estate; collect the assets; pay claims, taxes, and expenses; and distribute the residue.” By opening a dedicated estate account, the personal representative ensures accurate tracking of deposits, expenses, and distributions.
Benefits of an estate account include:
- Clear separation of estate funds from personal assets
- Streamlined accounting and recordkeeping for the probate court
- Protection against accusations of mismanagement or co-mingling
- Ease in paying creditor claims, taxes, and distributions
Failure to keep estate assets separate can expose the personal representative to liability. The court may surcharge (i.e., hold financially responsible) any loss caused by improper handling of funds. Opening a bank account in the name of the estate (“Estate of [Decedent Name], by [Personal Representative Name], Personal Representative”) minimizes this risk.
To open the account, the bank typically requires:
- Letters Testamentary or Letters of Authority issued by the probate court
- The estate’s Federal Employer Identification Number (EIN) from the IRS
- Personal identification of the representative
Refer to the full text of MCL 700.3702 here: MCL 700.3702.
Helpful Hints
- Obtain an EIN promptly: You cannot deposit checks or earn interest without it.
- Use clear account naming: Include “Estate of [Name]” in the title.
- Keep detailed records: Save bank statements, deposit slips, and canceled checks.
- Notify beneficiaries: Provide periodic reports and accountings as required by the probate court.
- Consult your financial institution: Ask about fees, minimum balances, and transaction limits.
- File required tax returns: Estate accounts may generate income taxable to the estate.
- Seek legal advice when in doubt: Missteps in accounting can lead to court challenges.