Estate administration involves settling someone’s accounts and fulfilling their final wishes as laid out in their will. An executor takes on some risk by managing the finances of the deceased individual.
Perhaps one of the most nerve-wracking concerns is the potential for an executor to take on tax liability if they don’t handle the taxes for the state or the deceased person appropriately. Will you have to file tax paperwork for the person who died?
An executor usually has to file a final tax return
One of your responsibilities as executor will be to ensure that the deceased individual has paid all of their taxes. You have to file a final return with the IRS. Any taxes still owed will need to be paid out of the estate assets before you start to distribute property to anyone else. If you hand out assets to family members when taxes have not been paid, you might wind up liable for those unpaid amounts.
An executor may have to file a tax return for the estate itself
Even if the estate doesn’t qualify for estate or inheritance taxes at the federal level, it may still be subject to income tax. If you have to sell property or liquidate investments for the estate, you will have to track the gains on those sales. If they exceed $600, you will likely need to file a tax return on behalf of the estate next year.
Getting support and advice about tax and financial obligations can help you avoid making mistakes during estate administration. An experienced estate planning attorney can help.