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Dealing with taxes as an estate executor

| Jan 15, 2021 | Estate Administration |

For many in Pennsylvania, the size of their estates when they die will not result in any major tax implications, such as the federal estate tax. Since the government allows a significant exemption, even those who have a great deal of wealth may be able to avoid having that tax put a dent in their loved ones’ inheritances.

However, estate taxes are not the only tax issues with which an estate executor will need to deal. If your loved one has named you executor or a court has appointed you to administer the estate of a loved one, you will likely have some dealing with the IRS and other tax collection agencies. Therefore, it is wise to learn as much as you can about these obligations and to seek assistance from whatever professional resources are available to you.

Estate and income tax requirements

Before you address any tax issues, you will need to gather and appraise the assets in the estate. In this way, you can ascertain the value of the estate, which may be important in determining whether the estate will owe federal estate taxes. It is possible the deceased will have creditors who will want their final payments, such as utilities, credit card companies and other lenders. Before you can deal with those creditors, you must deal with the tax matters.

To determine if your loved one’s estate owes federal estate taxes, you will need the answers to the following and other questions:

  • Did your loved one make any gifts exceeding $15,000 in the past year?
  • Did he or she make any comparable gifts in the previous years?
  • If those gifts exceed the annual thresholds for those years and you add the excess back to the estate value, does the estate surpass the annual exemption amount?
  • Is your loved one’s spouse still living?

Even if you do not have to file estate tax returns for your loved one, you may still have to file federal income tax returns. The date of your loved one’s death starts the clock ticking, and you have certain deadlines to file the returns or to seek an extension. Because completing someone else’s tax forms and the pressure of deadlines and IRS rules can be complex, many estate executors seek the services of a tax attorney who understands Pennsylvania and federal tax laws and the complicated nature of probate.