Opening and Managing an Estate Bank Account

Opening a dedicated estate bank account is one of the most important practical steps an executor can take. It protects you from accusations of mismanaging the estate, makes accounting straightforward, and ensures that the estate's money is clearly separated from your own. It is not legally required, but it is strongly advisable in almost every case.

Why a Separate Estate Account Matters

As executor, you are a fiduciary — you owe duties of care to the beneficiaries of the estate. One of the most fundamental of those duties is to keep estate money entirely separate from your own personal finances. Mixing the two (known as "commingling") can expose you to:

• Personal liability: if estate funds are mixed with your personal funds and later cannot be accounted for, you may be personally liable to repay them to the beneficiaries
• Allegations of misappropriation: even where no misappropriation has occurred, mixed funds create suspicion and make it impossible to provide clear accounts
• Tax complications: income earned on estate assets (such as rental income or savings interest) is assessable to income tax and must be tracked — a mixed account makes this very difficult
• Difficulties providing accounts: beneficiaries are entitled to formal estate accounts at the end of administration; these are much harder to prepare from mixed bank statements

Which Banks and Building Societies Offer Estate Accounts

Estate accounts are offered by a number of high street banks and building societies, though not all. The following are known to provide estate accounts to executors, though you should verify current availability and requirements directly with each institution:

• NatWest and Royal Bank of Scotland
• Barclays
• Halifax and Bank of Scotland
• Lloyds Bank
• Nationwide Building Society
• Yorkshire Building Society

Some banks will only open an estate account if the executor already holds a personal account with them. Others will open accounts for any applicant with the required documentation. It is worth phoning ahead to confirm current requirements before visiting a branch, as processes vary.

The documentation typically required is:

• Original sealed Grant of Probate or Letters of Administration (the original, not a photocopy — banks will usually take their own copy)
• Original or certified death certificate (again, the original or a certified copy)
• Your own proof of identity: valid passport or driving licence, plus proof of address (utility bill, bank statement, less than 3 months old)

How to Use the Estate Account Correctly

Once the estate account is open, the principle is straightforward: all estate money goes in, and all estate payments go out. Nothing else should pass through the account.

Money that should be paid into the estate account:

• Proceeds from closing or transferring the deceased's own bank accounts
• Proceeds from selling estate assets (property, investments, personal effects)
• Pension lump sums, life insurance payouts, and other death benefits payable to the estate
• Rental income from properties owned by the estate during administration
• Refunds or repayments owed to the deceased

Payments that should be made from the estate account:

• Funeral costs (reimbursement to whoever paid them initially)
• Inheritance tax and other taxes due
• Solicitor and professional fees
• Outstanding debts of the deceased
• Cost of valuing and clearing the estate
• Specific legacies and cash gifts under the will
• Final residuary distributions to beneficiaries once all debts and taxes have been paid

Record Keeping and Estate Accounts

Keeping a meticulous record of every transaction through the estate account is not optional — it is a legal duty. At the end of administration, you are required to provide formal estate accounts to the residuary beneficiaries. These accounts set out every asset collected, every payment made, and the final sum available for distribution.

Practically, this means:

• Keep copies of all bank statements from the estate account
• Retain all invoices, receipts, and correspondence supporting each payment
• Note the purpose of every transaction at the time it is made (do not rely on memory months later)
• Track income earned within the estate (savings interest, rental income) separately, as this may be taxable as estate income during the administration period

Estate accounts can be presented informally (a simple spreadsheet or printed summary) or formally (solicitor-prepared accounts). For large or complex estates, or where relationships between executors and beneficiaries are strained, formal accounts prepared by a professional reduce the risk of disputes.

Closing the Estate Account

The estate account should remain open until:

• All estate assets have been collected and banked
• All debts, taxes, and expenses have been paid
• All beneficiaries have received their entitlements and signed a receipt or discharge
• The estate accounts have been finalised and accepted by the beneficiaries

Once all of the above is complete, simply close the account in the normal way, keeping the final statement for your records. It is prudent to retain all estate account records for at least 12 years after administration is complete, as claims against executors can arise long after the estate has been wound up.