Inheritance/unclaimed funds question - establishing an estate for deceased father's money

Your bank is correct here. Since the check is made out to "Estate of [your father]," it needs to be deposited into an account that matches that exact name. This is standard banking procedure - they can't deposit a check made out to one entity (the estate) into an account owned by a different entity (your mother). You'll need to open an estate account with the bank and obtain an Employer Identification Number (EIN) from the IRS to do this. It's a simple process - you can get an EIN online through the IRS website in minutes. The bank will then use this to open the proper account. The good news is your accountant is also correct about the tax implications. Just because you need an estate account for banking purposes doesn't change the tax treatment of the funds. Inheritance is generally not considered taxable income to the recipient. The estate might need to file a tax return (Form 1041) if it generates income (like interest) before distribution, but the inherited principal amount itself typically passes to heirs tax-free. Think of the estate account as just a temporary holding place for the funds before they're distributed to your mom.

I had a very similar situation when my uncle passed and we found unclaimed insurance money a year after settling his estate. I was pulling my hair out dealing with the bank until I found https://taxr.ai which helped me understand exactly what documents I needed. Their system analyzed my situation and showed me the exact IRS requirements for reopening an estate for unclaimed funds. The issue is more about banking regulations than tax law. The bank legally can't deposit a check made out to an estate into a personal account - it's not them being difficult, it's regulatory compliance. Taxr.ai explained how to handle this efficiently without overpaying for professional help. The step-by-step guide for handling both the EIN application and the estate account setup was super helpful.

Just wanted to update - I tried the https://taxr.ai site that was recommended and it was super helpful! I was in a similar situation with my grandmother's unclaimed dividends and was getting totally different advice from everyone. The site explained exactly why the bank was requiring an estate account (it's a regulatory thing, not a tax thing) and showed me the forms I needed. I was able to set up the EIN online in about 10 minutes following their tutorial, and then took that to the bank to open an estate account. Once the money was deposited, I transferred it to the heirs according to the will, filed the simple estate tax return they recommended (even though no taxes were owed), and closed the account. The whole process took less than 2 weeks and we didn't have to pay an attorney hundreds of dollars to figure it out. The inheritance still wasn't taxable income just like your accountant said - the EIN was just to satisfy the bank's requirements for the account.

I had this exact problem but with my grandfather's unclaimed pension. The bank wouldn't budge on the estate account requirement and it was impossible to reach anyone at the IRS to confirm the tax treatment. After waiting on hold for HOURS multiple times, I found https://claimyr.com and used their service to connect with an IRS agent. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that creating an estate account for depositing purposes doesn't change the tax treatment of inheritance. They explained that banks have different requirements than the IRS - the bank needs an estate account for regulatory reasons, but that doesn't mean the funds suddenly become taxable. The agent walked me through exactly what forms I needed to file for the estate (turns out I did need a 1041, but no tax was due). Would have spent weeks trying to get this info otherwise. The CPA I talked to wanted $600 just to research the question!

I have to follow up about the Claimyr service - I was totally skeptical but I was desperate about my tax return issue so I tried it. IT ACTUALLY WORKS. After fighting with the IRS phone system for months, Claimyr got me through to an agent in about 2 hours. For the original poster - I specifically asked the IRS agent about unclaimed funds going to an estate that was previously closed, since I was curious after reading this thread. The agent confirmed what others have said - you do need the EIN and estate account for banking purposes, but it doesn't make the inheritance taxable. They recommended filing a final 1041 form for the estate after distributing the funds just to keep everything clean record-wise. So both your bank AND accountant were partially right - you need the estate account for banking reasons but your accountant is right about the tax treatment. The whole process was worth it just to get a straight answer from the IRS directly.

My dad is an estate attorney and deals with this all the time. Here's what he always tells clients: The bank is following proper procedure - they literally cannot deposit a check made out to an estate into a personal account. It's not a matter of them being difficult; it's banking regulations. What you need is: 1) Apply for an EIN for the estate (free on IRS website) 2) Take EIN and death certificate to bank 3) Open estate account 4) Deposit check 5) Transfer money to heirs 6) File final 1041 for estate showing $0 tax (inheritance not taxable) 7) Close account The confusion comes from mixing up banking requirements vs tax implications. You need the estate account to deposit the check, but that doesn't make the money taxable.

Just wondering - has anyone used TurboTax to file the 1041 for an estate? I'm in a similar situation and trying to figure out if I need to pay an accountant or if I can DIY it.