Can an Executor of a Will Be Responsible for the Deceased's Taxes?

By Beverly Bird

Everyone has the right to disburse their assets to whomever they wish when they make a will, but the Internal Revenue Service taxes that right. The executor of a will is not liable for paying the IRS personally, out of their own pocket. However, he is responsible for making sure that the IRS gets their money from the estate of the decedent, or the person who died.

Everyone has the right to disburse their assets to whomever they wish when they make a will, but the Internal Revenue Service taxes that right. The executor of a will is not liable for paying the IRS personally, out of their own pocket. However, he is responsible for making sure that the IRS gets their money from the estate of the decedent, or the person who died.

Executor Duties

An executor is responsible for filing tax returns for both the deceased individually and for her estate. The estate return is usually due within nine months after death. With the individual return, the executor should also file a copy of the death certificate and alert the IRS that the taxpayer has passed away. If you are the executor of an estate, you should consult with an accountant, tax attorney or estate attorney for guidance. Tax laws governing estates are complex. For example, an estate can use any fiscal year it chooses and there may be significant tax savings or ramifications for the estate resulting from the one you choose.

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Common Tax Liabilities

Because most estates generate at least some income while they are being probated, an estate income tax return must usually be filed with the IRS by the executor to account for that money. This is separate from, and in addition to, death taxes which, can be due on the overall value of the estate. If the deceased earned any income during his last year of life, a personal tax return is also necessary. Some states also require inheritance taxes. The IRS places a lien on all real estate owned by the decedent until federal taxes are paid.

The Law as of 2010

In 2001, President Bush passed a tax cut intended to phase out estate or death taxes – though not estate income taxes – by 2011. Under that law, the estates of those dying in 2011, and presumably later, would not have been required to pay taxes on the value of assets, but only on any income earned by the estate during probate. The Obama administration changed that law in early 2009 to keep the tax liabilities against estates as they were at that time. Instead of being eliminated in 2011, estate taxes maintain at 45 percent of the value of the estate for estates valued at up to $3.5 million in 2010 and beyond.

Exemptions

The IRS allows tax deductions on estate income tax returns for any state inheritance taxes paid, as well as for taxes paid on the value of the estate. Some family-owned businesses qualify for exemptions. If a surviving spouse is not a United States citizen, a portion of estate taxes might be deferred. Costs of administering the estate, such as professional fees to accountants, attorneys and appraisers, probate expenses, real estate commissions and fees incurred by selling assets, are also deductible.

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How to File Form 1041 for Estate Tax

References

Related articles

Responsibilities of an Executor of Estate in Nashville, Tennessee

The probate division of the Seventh Circuit Court oversees probate of estates in Nashville, Tennessee. The executor of an estate must report in periodically to this court. Normally, a decedent names an executor in his will: This is the person he wants to settle his estate, paying his debts and apportioning his remaining assets among his beneficiaries. When a decedent does not leave a will, his estate must still pass through probate, but the probate division appoints an executor.

Estate Laws for Insolvent Estates in Georgia

Georgia law considers a decedent's estate insolvent when the decedent dies without enough money to pay all of his debts, including taxes. As in bankruptcy, Georgia law exempts some assets from creditor attachment. In other words, some assets are not available to creditors to satisfy an estate's debt. Georgia law establishes the order in which debts must be paid from estate assets less exemptions. Each debt must be paid in full before the next in line may be paid. If there are not enough assets left to pay all of the debts remaining, those creditors do not receive payment.

What Expenses Can an Executor Take for Estate Tax?

When a person dies, everything he owns is included in his gross estate. For federal tax purposes, the entirety of the gross estate is not taxed. The executor is permitted to make deductions from the gross estate, decreasing the eventual estate tax obligation. An important set of deductions are expenses related to the estate. It is important to note that only estates valued over $5.12 million are required to pay federal tax. Consider consulting with a licensed attorney or certified public accountant if you are an executor and required to prepare an estate tax return.

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