Nothing is certain except for death and taxes.
Benjamin Franklin wrote those famous words to a French politician friend in 1789 shortly after the U.S. Constitution was signed, but the sentiment had been around for many years prior.
Most people don’t realize that you may still have to file taxes after you die — a task that falls on the executor or administrator of your estate, or the trustee of your trust.
Because federal and state tax laws are constantly changing and can be complex, it’s essential to work with an experienced estate planning attorney and CPA to ensure that you file the correct forms and properly prepare the filings.
Errors in estate and trust tax filings can be costly, and can reduce the amount of money that your heirs and loved ones receive.
If you are serving as the executor or administrator of an estate, you will probably need to obtain an estate tax identification number, called an Employer Identification Number or EIN, for the estate. You may also need to open an estate bank account.
If there was income of more than $600 after the death — from a final paycheck, or interest earned on investment accounts — you will also need to file an income tax return for the estate.
You may also need to make sure that the decedent’s final tax return is filed.
If the decedent made large gifts before their death, you may need to file a gift tax return or other related filings.
If the decedent owned a business or held stock in a business, you may need to file additional tax returns for those business holdings.
There may be outstanding tax matters from previous years that you will need to clear up, such as back taxes owed or penalty payments, and a CPA and attorney can help you navigate and resolve those issues.
Often, there are other tax matters such as sales tax on the disposition or liquidation of assets such as a car or boat, capital gains taxes, and other tax implications related to the administration of the estate that a CPA and attorney can help you address.
Having an estate plan in place ahead of time is vital. An attorney who specializes in estate planning can help you determine the most tax advantageous ways to preserve your wealth for your heirs and loved ones.
Disclaimer: This content is for informational purposes only, and does not constitute legal advice nor create an attorney-client relationship with Bequest Law.