Probate and Estate Planning: Income and Inheritance (or "Death") Taxes

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The emotional trauma brought on by the death of a close family member is often accompanied by bewilderment concerning the legal steps necessary to probate and administer an estate. These responsibilities ultimately fall on the person appointed as Executor in the deceased family member's Will.  Although not specifically stated, many of these steps are taken only after consultation with the attorney representing the estate. 

One of those responsibilities  is the  The determination of tax liability after the death of a family member is highly technical.  The complexities of both income and inheritance or "death" taxes make expert knowledge and experience essential to adequate protection of the estate.  Frequent changes in the tax law, on both state and federal level, create increasingly intricate tax issues in estates of all sizes.  The Executor will need not only to consult with an experienced estate settlement attorney, but also with a competent accountant.

Federal and State Income Taxes.  Regarding the decedent's income before death, the Executor should provide the accountant with copies of the prior three (3) years tax returns in order for the accountant to assess the history of the decedent's tax filings.  The final income tax returns and any final settlements with tax authorities will need to be completed in a timely fashion and the expertise of a qualified accountant will be invaluable.  Under state and federal laws, the estate is a separate taxpayer, therefore, any taxable income received into the estate is reported on a Afiduciary or estate income tax return which is normally due four (4) months after the close of the accounting year for the estate.

Estate and Inheritance Taxes.  Regarding inheritance or "death" taxes, the attorney and accountant are indispensable.  There are many considerations to be made in the preparation of the inheritance estate tax return.  The inheritance estate tax return is due nine (9) months from the date of death.  This time period is used to perfect the inventory and  determine the final valuations to be used on the return.  The accountant can advise as to whether to use date of death values or an alternate value which the Internal Revenue Service allows under certain circumstances.  Once these return is filed, audited and released, the Executor can proceed with finalizing and formally closing the estate.

This writing is intended to generally familiarize you with various legal issues.  The scope of this document is necessarily limited, and consultation with your attorney should always precede taking any action.

Next in our Probate series: Probate: Final Settlement of Estate

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