Be Prepared for Closing and Receiving Funds from the Sale
The personal representative should set up an estate bank account soon after being appointed by the court. The successor trustee also should set up a trust bank account soon after the decedent dies. For successor trustees, most revocable living trusts become irrevocable upon the death of the trust maker, and will need a new taxpayer identification number apart from the decedent’s social security number. This bank account will be the account that closing proceeds will be wired to.
Opening a bank account requires the personal representative or successor trustee to obtain a taxpayer ID number for the estate from the IRS. The estate will have a taxpayer ID number that is different from the decedent’s social security number or the personal representative’s social security number. This number is then used to establish a bank account for the estate. Title companies will require an estate bank account number to issue any wire transfers to the estate. If the sale proceeds are in the form of a title company check, that check will be made out to the estate and will need to be deposited into the estate bank account. You cannot receive the proceeds from the sale in your own name because you were not the seller. Instead, you sold on behalf of the estate or the trust. As such, the estate or trust receives the funds, not you. Failure to timely obtain a taxpayer ID number or establish an estate bank account can cause last-minute delays to closing, which can cost the estate money in the form of per diem penalties for missing closing, or can even derail the entire transaction.
It also is important to remember that closing on the sale of the decedent’s residence is not the end of the probate; it is only a portion of the entire probate process. Once the house is sold, there still could be creditors to pay and beneficiaries to distribute funds to. It is vital for the PR to remember that the Colorado Probate Code may hold the PR responsible for paying any creditors who timely submit a valid claim against the estate and cannot be paid because the estate’s funds were prematurely distributed to beneficiaries.
Remember, if you are the personal representative of an estate selling real estate, you will have two closings: the closing of the sale of the real estate and the closing of the probate estate. The closing of the real estate sale is not the end of the personal representative’s responsibilities.
