Do Banks Pay Interest On Executor Accounts

HA57

I don't know if I should be posting my question here or on another MSE forum board, I will try here first. I am Executor for a relative's estate. Because of various issue I cannot distribute funds to the beneficiaries of my relatives Will for a few months so they are sat in an Executor account I have opened with a high street bank. The bank will not pay any interest on these funds because they are held in an Executor account. The estate is missing out on £000's in interest each month, while the bank is benefitting by getting 5% interest on these funds. I have asked other high street banks and none will pay interest on funds held in Executor accounts. Is this correct and could MSE look into this please? It seems like theft to me. 

mab3000

I might be wrong as it’s been well over a year now since I left Barclays, but I’m sure Barclays give you an option to open the equivalent of their everyday saver account as an executors account, albeit paying the small amount of interest that account pays. 

blue.peter

I'd have thought that it must be pretty rare for an executor account to be open for more than a short while. Isn't the norm for the executors to have to wait for probate before most of the estate can be realised and the money paid to the bank account, and then distribute it pretty much immediately? The bank will have some costs in setting up the account, administering it and then closing it down. Those costs are, presumably, recouped through the little bit of interest that they might make on the funds. That is, I think, how they can afford to offer such accounts. Describing this as theft seems a little extreme. I'd imagine that most trustees would be glad not to have to pay charges.

So your situation - where what sounds like substantial* funds are sitting in what amounts to a current account for several months - is pretty unusual. I can't see banks doing something special for a rare situation.

Having said that, have you tried to get a savings account alongside the main account? Executors are a type of trustee, and I think that banks offer savings accounts to trustees.

*At least several hundred thousand pounds, given your statement that interest would be thousands/month.

HA57

mab3000 said:

I might be wrong as it’s been well over a year now since I left Barclays, but I’m sure Barclays give you an option to open the equivalent of their everyday saver account as an executors account, albeit paying the small amount of interest that account pays. 

Thank you. I will discuss this with Barclays. They do not have a branch near me so I will ring HO. HSBC, Lloyds and NatWest all declined to pay interest. Any interest is better than nothing.

HA57

blue.peter said:

I'd have thought that it must be pretty rare for an executor account to be open for more than a short while. Isn't the norm for the executors to have to wait for probate before most of the estate can be realised and the money paid to the bank account, and then distribute it pretty much immediately? The bank will have some costs in setting up the account, administering it and then closing it down. Those costs are, presumably, recouped through the little bit of interest that they might make on the funds. That is, I think, how they can afford to offer such accounts. Describing this as theft seems a little extreme. I'd imagine that most trustees would be glad not to have to pay charges.

So your situation - where what sounds like substantial* funds are sitting in what amounts to a current account for several months - is pretty unusual. I can't see banks doing something special for a rare situation.

Having said that, have you tried to get a savings account alongside the main account? Executors are a type of trustee, and I think that banks offer savings accounts to trustees.

*At least several hundred thousand pounds, given your statement that interest would be thousands/month.

Yes, it is a fairly unusual (and unfortunate) situation for the funds to have to sit in an Executor account for several months but this is what my solicitor has recommended, and why I want to do my best for the estate by getting some interest on the amount. The bank where it is currently lodge will be making nearly £2k per month interest on it and not paying me a penny in return. If that's not theft, what should I call it? I have tried other high street banks but those I have spoken with would not offer any form of savings account, linked or otherwise. I have now been told by another forum member that Barclays may do, so I will contact them. Thank you for your comments.

wmb194

What's the legal status of an executor's account? Is it actually just an account in the name of an executor(s)? I.e. there isn't anything about it that's special. IIRC there's no legal requirement to have one that's termed an, 'executor's account.'

greyteam1959

My late parents funds were held by the solicitors dealing with the estate.
They paid interest on the funds they held.
We never bothered opening an executor bank account.

etienneg

What's holding you up from dealing with the estate? Why can you not make an interim distribution? That way, the sum in the executor account can be significantly reduced.

Keep_pedalling

HA57 said:

blue.peter said:

I'd have thought that it must be pretty rare for an executor account to be open for more than a short while. Isn't the norm for the executors to have to wait for probate before most of the estate can be realised and the money paid to the bank account, and then distribute it pretty much immediately? The bank will have some costs in setting up the account, administering it and then closing it down. Those costs are, presumably, recouped through the little bit of interest that they might make on the funds. That is, I think, how they can afford to offer such accounts. Describing this as theft seems a little extreme. I'd imagine that most trustees would be glad not to have to pay charges.

So your situation - where what sounds like substantial* funds are sitting in what amounts to a current account for several months - is pretty unusual. I can't see banks doing something special for a rare situation.

Having said that, have you tried to get a savings account alongside the main account? Executors are a type of trustee, and I think that banks offer savings accounts to trustees.

*At least several hundred thousand pounds, given your statement that interest would be thousands/month.

Yes, it is a fairly unusual (and unfortunate) situation for the funds to have to sit in an Executor account for several months but this is what my solicitor has recommended, and why I want to do my best for the estate by getting some interest on the amount. The bank where it is currently lodge will be making nearly £2k per month interest on it and not paying me a penny in return. If that's not theft, what should I call it? I have tried other high street banks but those I have spoken with would not offer any form of savings account, linked or otherwise. I have now been told by another forum member that Barclays may do, so I will contact them. Thank you for your comments.

Why has the solicitor told you this? If you have a good understanding of the testators finances and are pretty sure there are no big creditors waiting to crawl out of the woodwork, you could at least do an interim distribution holding some back to cover yourself, unless of cause someone is challenging the will in which case you are stuck.

If you have placed a notice in the London Gazette unknown creditors have 2 months to claim against the estate after that they would have to chase the beneficiaries not the estate administrator.

eskbanker

HA57 said:
The bank where it is currently lodge will be making nearly £2k per month interest on it and not paying me a penny in return. If that's not theft, what should I call it?

Something less emotive perhaps, to reflect the fact that there is no automatic right to earn interest on money deposited with financial institutions and hence the vast number of products (e.g. current accounts) that don't pay any?

Ballard

If you did find an alternative account which paid interest I’m curious as to how they would allocate the interest payments. Presumably, because the ultimate beneficiaries would be individual there would, at least potentially, be tax to pay. The bank won’t know what proportion needs to be allocated to who so how would they report it?