Tuesday, August 19, 2014
When a loved one dies, all financial debacles do not automatically disappear. Someone must step up to handle the resulting financial matters. This person is often named in the decedent’s will as the estate executor; yet if there is no will, the probate court may appoint an executor. If you end up with the job, you will identify the estate’s assets, pay off its debts, and then distribute what is left to the rightful heirs and beneficiaries. You are also responsible for filing any required tax returns and paying any taxes due.
There are several tax issues executors should be cognizant of including those appearing on the income tax return. Make sure to look out for medical expenses. If large uninsured medical expenses were incurred but not paid before death, the executor must choose how they are treated for federal income tax purposes.
You may also have to file a federal income tax return for the estate. Once an individual has passed away, any income generated by his or her holdings after death becomes part of the estate and is taxed on the estate’s own federal income tax return.
See Bill Bischoff, Dying Doesn’t Make the Taxman Go Away, Market Watch, Aug. 19, 2014.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.