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Requiring Estate Account TINs
by Mary Beth Guard, BOL Guru

Question: Does an Estate account have to have an Estate TIN? Some of our customers' lawyers are telling them that they don't have to have an Estate TIN to change the name of the deceased's account into an estate account. Our customers are getting quite angry with us. And, of course, the bank down the street will open the account without it. Are there situations when an Estate TIN is not required? The situations we've dealt with have been a deceased customer with a will and the executor comes in to change the account. Any help would be appreciated. I do wish there was a manual that dealt with IRS issues for banks in plain English!

Answer: No estate tax return needs to be filed on the federal level unless the estate is over $600,000, and many states have a similar threshold, so the lawyers are asserting they don't need to get a TIN because the estate will not have to file taxes. The fact that a particular estate will not be required to file a tax return, however, does not mean that they should not have a TIN for banking purposes.

Interest cannot be earned by a deceased person. If the personal representative of an estate wants to set up an estate account without getting a TIN and you want to accommodate them, there are a couple of routes you could take:

  1. Use a non-interest bearing account, since the estate would be the recipient of the interest and you don't have an estate TIN to properly report in. They will have to just live with the fact that they will not be able to earn interest without supplying an estate TIN. Since it is non-interest bearing, you wouldn't have any backup withholding worries and the account styling would correctly reflect that the owner of the account is the estate; or/li>
  2. Style it: John Doe, Executor, Estate of Ron Smith
    and use John Doe's SS# as the TIN. You would then have a match between the first name and the TIN and you show that the funds are held by John in his official capacity as executor of the estate, rather than them being owned personally by John. Even in this scenario, you should not use an interest-bearing account because you would have to report interest in the name of John Doe and he certainly won't want the tax liability for interest earnings that he is not personally receiving.
Is either one of these methods truly a proper way to set up an estate account? No. The proper way is to have an estate TIN. Is this a bad way to do it? Well, it's not horrible. When you look at it from all the different angles, there really isn't much risk, danger or downside to it. On the other hand, I urge you to instead handle it the proper way and obtain an estate TIN. Have the blank SS-4 form ready to hand to the personal representative of the estate. They can complete it, fax it to the IRS, and have a TIN within 30 days at most.

Originally appeared in the Oklahoma Bankers Association Compliance Informer.

First published on 9/10/01

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