Introduction
When you open a probate estate case in Ohio, the executor or administrator is responsible for managing the assets wisely until they are distributed to the beneficiaries. Most often, this is thought of not wasting, recklessly investing, or neglecting the assets. However, if an estate is large or has a lot of cash, fiduciaries have an opportunity to invest the cash to earn a profit. This article will cover the rules and best practices for investing estate funds in Ohio probate estates, based on my experience handling hundreds of estates.
The Best Approach: Stick With the Decedent’s Investments
In most cases, the smartest and safest investment strategy is also the simplest: keep the investments the decedent held at the time of death—provided they are worth holding. Under Ohio probate law, you don’t need court permission to maintain existing investments.
For example, if the decedent died with stocks, you can continue to hold them in the estate and collect dividends and capital gains. The income can help offset estate expenses, including attorney’s fees and executor compensation, and which also offset the income tax. The law permits the fiduciary to continue to hold these investments without fear of liability from losses. However, if the decedent holds poorly performing stocks or bonds, then it might be better to sell those assets and reinvest the cash in ways that I discuss below.
When it’s time to distribute the estate, you can liquidate the investments and distribute the proceeds in cash, or you can transfer the investments “in kind” directly to the beneficiaries–the beneficiaries receive the asset itself, tax-free. The beneficiaries will pay tax only on the sale of the asset to the extent that the gain exceeds the date-of-death value of the asset.
Handling Estate Cash: Court-Approved Options
Sometimes, an estate includes large amounts of cash—whether from liquidated assets, bank accounts, or incoming payments. How should that cash be held or invested during probate? Most fiduciaries and probate attorneys either don’t know or don’t bother to invest the cash to generate interest or dividends–sometimes resulting in thousands of dollars of lost income to the estate. Although it is not necessarily illegal to fail to invest the cash, it is certainly not an ideal way to manage someone else’s money.
A fiduciary of an estate is limited by Ohio law as to what investments might be made without additional court approval. Here are the best options for investing estate cash during probate in Ohio:
Savings or money market accounts. These are stable and highly liquid, offering yields of around 4% as of the time of this writing. Your bank usually offers a money market account, but they might require a minimum balance or offer a less-than-ideal rate. Not all banks are interested in attracting cash deposits, so you need to shop around and ask the bank for details on their interest rates. I have found that often, banks are not the best option for holding estate assets.
Certificates of Deposit (CDs): Short-term CDs (3–6 months) are paying around 3–4%. These are not ideal investments for estates unless you are sure that the funds won’t be spent on expenses or distributed for more than a year–a rare situation to know at the outset. Best to avoid this option unless you have a good reason.
Short-term U.S. Treasuries: Treasury bills with maturities under 90 days are authorized by Ohio law. However, these assets will not be easy to purchase for someone who is not well-versed in the market, and might require large amounts of capital to buy.
Short-term Treasury ETFs. This is my go-to option. My personal favorite investment is SGOV—a short-term treasury fund currently yielding about 4.25%. It can be bought and sold like a stock in a brokerage account. You can easily open a Schwab estate account in a matter of days and purchase SGOV with it set for reinvestment of dividends. Using a Schwab account has many advantages over a traditional bank: it can managed online, they charge no monthly fees, checks can be deposited with the mobile app, and they will send you a checkbook for free upon opening. The opening process is an easy application that can be submitted online if you already have a Schwab account or it can be mailed or dropped off at a local Schwab location. Most estate applications only take a week or less to process and do not require you to leave your home or office. Overall, it’s the best option I have found for managing funds for the myriad of estates that I administer.
If you are a fiduciary of an estate in Ohio, make sure you are not leaving money on the table by putting it all in a checking account — put that cash to work!
If you’re administering an estate in Ohio and want to ensure the assets are protected and working for the heirs, contact Carson Law Firm today. We’ll help you maximize the estate’s income while staying 100% compliant with the law.
Christian Carson
Christian Carson is the founding attorney of Carson Law Firm LLC in Cleveland, Ohio. He holds degrees in law and accountancy from Case Western Reserve University. With a strong background in accounting and finance, Christian focuses on real estate, probate, and business law. He is committed to providing practical legal solutions for individuals and small business owners.
