If you’ve become the executor of an estate, first off, we wish you condolences if the deceased was a friend or relative. We know that this period is a hard time for many people who are administrating the estate of a loved one.
As part of that, we hope that this period is as painless as possible and to help here’s a quick overview of the tax situations that you may have to deal with, so you have an idea of what will be expected.
- Personal Income Tax for this year: Remember that both death and taxes are inevitable, and that means that if the deceased made money in the year they died their estate will still have to file an income tax return for the year that they died.
- Personal Income Tax for the previous year: If the person dies in the early part of the year prior to the previous year’s income tax return being filed (for example, if they die in February, before the April 15th filing date), that will need to be done as well.
- Gift tax: If the deceased person made gifts in excess of $14,000 per recipient in 2017 (check the current exclusion), a gift tax payment may be required. Form 709 (the “United States Gift (and Generation-Skipping Transfer) Tax Return”) is the form that is required if this is the case.
- Estate income tax: If the estate earns money after the person has died, and the income is generally more than $600 or if one of the estate’s beneficiary’s is a nonresident alien, then Form 1041 (the “Income Tax Return for Estates and Trusts”) may be required.
- Estate tax: Also sometimes called the death tax, this may require a Form 706 (the “United States Estate (and Generation-Skipping Transfer) Tax Return”). Right now (for 2017) if the fair market value of all of the person’s estate assets is below $5,490,000, then you probably don’t need to file one. If the deceased was married, they may need to file so they can use the unused portions of this exemption when the second member passes (that’s called the “portability” election).
Due dates. Form 706, for the estate tax, is due nine months after the individual dies. Forms 1041 and Form 709 are due April 15 of the following year. Forms 706 and 709 may benefit from extensions.
Again, our best wishes are with you in this difficult time, and we hope you find this information useful. If it isn’t enough information to point you in the correct decision, you should consider finding an accounting firm to assist you. Taxes are complicated at the best of times, and we can certainly help take some of the pressure off.