Who Pays Estimated Taxes After a Person’s Death?
A death in the family brings lots of emotions, but it can also bring about a lot of questions. Often, those questions are financial in nature, and though this is a delicate time, it is important that these issues are taken care of promptly and properly.
Consulting an estate attorney is important when there are financial issues to resolve.
The executor is the personal representative appointed to administer the deceased’s estate. The executor offers the will for probate, disburses property, collects and pays debts, finds out if there are any heirs to whom property or payment should be doled out, makes sure estate taxes are calculated and paid and assists the estate’s attorney.
Your estate is everything you own: your real estate, bank accounts, investments, personal property, retirement benefits and insurance policies.
The Estate Tax
The estate tax is a tax on the transfer of property to others, including children and other relatives. It was enacted to prevent the transfer of huge fortunes to be passed down to the next generation of a family.
Depending on how much you have, your estate will have to pay this tax before anything can be disbursed to beneficiaries.
The executor is generally responsible for filing the deceased’s state and federal income tax. If you are experienced at filing and the deceased’s returns aren’t complicated, it would be acceptable to file them on your own. However, an accountant will be helpful and should be retained if there are business or other concerns.
The executor is responsible for paying any tax owed with money from the deceased’s estate–not their own money. A copy of the death certificate and copies of the deceased’s last four tax returns should be on hand.
Minimizing Estate Tax
There are three ways that you can reduce your estate tax liability before you die:
- Spend or gift your assets before you die. Although, no one knows how long they will live, if you have an excess of money and aren’t afraid of running out before you die, this is an option.
- Look into advanced estate planning. There are a variety of options of available that are designed to reduce your estate tax and still maintain your current income stream. Consult a certified financial planner to learn more.
- Move to another state. Not always an attractive option, but there are a number of states (Connecticut, Delaware, District of Columbia, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Nebraska, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Vermont or Washington) that collect an estate or inheritance tax on top of the federal tax. Moving away from one of these states will reduce that liability.
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