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Wills · Living Trusts · Probate Law ·
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If You're The Executor...
The basic rule of maintaining proper
financial records for an estate is to document absolutely everything. The
greater the detail, the more substantiation, the better. It is always easier to
document and describe a transaction when it occurs than at a later date when
someone is questioning the transaction.
Selecting a bank
Many
executors simply continue to bank where they have had their personal bank
accounts or where the decedent maintained bank accounts. Although this may be
adequate, there may be no compelling reason to continue using either institution
for the estate. Evaluate the estate's banking and financial needs and interview
not only previously used institutions but others as well.
Estate
financial matters create different needs and can benefit from different services
and departments than personal banking needs. Inquire as to what specific trust
and estate services various institutions offer, how they price them and what
specifically they can do to assist you in handling the estate. Many larger
institutions have extremely sophisticated trust departments that can assist you
in arranging financing, consolidating accounts, investment management and so
forth. These services may help you hold down legal and other fees.
Accounts in estate name
All transactions should be run through
the estate's name and under the estate's tax identification number. Other than
minor exceptions for necessary initial expenditures by you prior to the estate
account being opened (each of which should be carefully documented) never
commingle estate funds with your personal funds, beneficiary funds and so on.
Safety checks
Purchase safety checks for all estate payments.
These checks have a carbonless check voucher attached. Each time you write out a
check a carbonless second sheet records the transaction. Take this second sheet
(called voucher copy of the check) and staple the bills or other documents
supporting the payment to them. Then file these in check number order.
Document all cash payments
If you choose to advance your own
funds to cover an estate expense, make a copy of the check and attach copies of
the supporting documents (e.g., the bill). When the estate checking account is
open, you can then reimburse yourself and use the previously assembled backup to
support the check.
Run all financial transactions through one estate
checking account
You can vastly simplify the record keeping for the
estate by running all payments and deposits through a central or single estate
checking account and brokerage account. Any proceeds of any nature received
should be deposited in one estate checking account. Each deposit slip should be
saved and the source and nature of the deposit clearly explained. Even if the
estate receives a large settlement that you will invest pending distribution,
first deposit it in the central estate checking account and thereafter transfer
it to the estate brokerage account for investment. All investments should
likewise be made in street name in a single brokerage account (unless the estate
is so substantial that the insurance limits on the account will be exceeded).
All payments
should be made from the same account. Similarly, each check should clearly
document the purpose of the check. Carefully describe every deposit, check,
credit/debit memo or other transaction. Detailed descriptions will make it much
easier for you, or your professionals, to identify transactions, prepare
accountings and complete tax returns.
Copyright © 2000-2002 American Estate Planning Attorney Directory. All
rights reserved.
AEPAD is the American Estate Planning Attorney
Directory. While the information on this site deals with legal issues,
it does not constitute legal advice. If you have specific questions related
to information available on this site, you are strongly encouraged to consult
an attorney who can investigate the circumstances of your situation and the
particulars in your state.
