Executors inventory the estate in the early stages of estate administration. Occasionally, financial accounts might contribute to complications in the administrative process. Even estates with a thoughtfully crafted and updated estate plan can experience problems in probate.
The executor must review assets and safeguard them until the estate is settled and distributed. Understanding the factors that could compromise financial accounts can help the executor to prevent issues or, at the very least, minimize the impact of existing problems.
It’s more than likely that an individual has multiple financial accounts. It’s also realistic that an account might be forgotten, abandoned, or otherwise overlooked by the account owner during their lifetime. These inactive accounts may seem harmless as the funds are not being spent or aggressively invested with serious risk. However, nearly all financial institutions impose minimum balance requirements, annual fees, maintenance fees, or other associated costs. Inactive accounts may unintentionally be depleted by these fees over time.
Not only can fees associated with inactive accounts diminish funds during the account owner’s life, the fees can still accumulate from the account owner’s date of death until estate settlement. Probate does not freeze bank fees. Typically, the executor must document post-mortem expenses such as bank fees and satisfy these expenses prior to asset distribution to beneficiaries of the estate. If not monitored or handled expediently early on in probate, inactive accounts could be fully exhausted by fee requirements. In some circumstances, overdraft fees could apply.
Probate and Inactive Accounts
According to a recent article highlighting a multi-year probate case that involved an inactive account, the account over-drafted due to maintenance fees. The article advises that the majority of states have a two-year dormancy window that applies to bank accounts. Some states consider accounts dormant if no activity occurs within two years, and the institution may turn the funds over to the state’s unclaimed funds division if the account owner is unresponsive.
For executors managing assets in probate, not only should they review the title of financial accounts, payable on death or transfer on death forms, and the balances of each account—executors should also review the account history, actively monitor maintenance fees, and take necessary efforts to safeguard assets for distribution.