Estate administration involves more than just distributing inheritances. Before making final distributions from the estate, the personal representative (executor) needs to ensure that they have fulfilled all of the obligations of the deceased party.
Estate administration usually involves resolving tax obligations, as adults may have acquired valuable property and generated taxable income before their passing. What taxes do personal representatives typically need to address?
1. The decedent’s income taxes
After a person dies, it is necessary to file a final income tax return on their behalf. Doing so notifies the IRS of an individual’s passing and also helps reconcile any lingering financial obligations. Even if the deceased party hadn’t worked in years or has a surviving spouse, the personal representative of the estate is typically the one who files the deceased person’s last income tax return.
2. The estate’s income taxes
Frequently, personal representatives sell estate assets to distribute the proceeds among beneficiaries or use the revenue generated to cover financial obligations. If the sale of resources produces $600 or more in income, the estate itself may owe income taxes.
3. Estate taxes
Generally speaking, only especially large estates are subject to estate taxes. Georgia does not collect an estate tax or an inheritance tax, but federal estate taxes often apply to large estates probated in Georgia. However, if the property that belongs to the decision is worth millions of dollars, then the estate might owe taxes based on its overall value.
Filing tax returns and paying necessary taxes is a key element of estate administration. Personal representatives can reduce the likelihood of making mistakes and oversights by getting experienced legal guidance.