Carteret County, NC, Probate and the Fiduciary Tax
A fiduciary tax return often arises within the context of the probate process. Basically, the fiduciary tax return is simply an income tax return that applies specifically to a decedent’s estate. The fiduciary, either the administrator or executor of the estate, is required to keep track of all income received by the estate during its pendency. This means from the date it is opened, until the date it is settled and closed. This is an annual tax return. For each year the estate remains open, the fiduciary is required to file a separate tax return.
This tax is only levied against monies received into the estate from which are classified as income. The most common sources of income to the estate are dividends and interest derived from stock, investment accounts, and other bank accounts owned by the decedent. Generally, taxable income does not include cash on hand or other liquid assets which are owned by the decedent at death and later transferred into the estate account. It also does not include cash advances to the estate by the fiduciary or a third party, nor does it include the payment of insurance or annuity proceeds to a named beneficiary. As to the latter scenario, the one exception occurs when the estate itself is the named beneficiary of the insurance policy or annuity. In such case, the transfer may result in taxable income to the estate.
As with estate tax, there exists a threshold below which income chargeable to the estate is exempt from the fiduciary tax. Unlike the estate tax exemption, the fiduciary tax threshold is very modest: only $600 per year. Therefore, a fiduciary is required to file a return if more than $600 of countable income has been received by an estate in a given calendar year. Thus, filing a fiduciary return is often necessary in the settlement of the estate.
Fortunately, the filing a fiduciary tax return need not be costly or burdensome to the client. At Harvell and Collins, P.A., our estate attorneys work closely with clients to obtain the necessary 1099s and other relevant documents and information, thus facilitating the filing process to make it go as smoothly as possible.