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What roles do taxes play in estate administration?

On Behalf of | Sep 2, 2021 | Estate Planning And Probate

Handling someone’s estate as an executor means finalizing all of their personal matters. You need to collect, secure and inventory their property. You will have to file paperwork with the probate courts. 

You have to pay off their debts, and then you will be able to distribute property to the beneficiaries of their estate. With all of that to worry about, you could easily overlook taxes, which are a major part of managing an estate. What taxes will you need to handle as the executor of an estate?

The requirement to pay estate taxes

When people think of taxes after their deaths, estate taxes are usually what they imagine. An estate tax applies to the total value of someone’s assets at the time of their death. North Dakota does not currently assess an estate tax. Only estates worth over $11.7 million will potentially be subject to taxation at the federal level.

A final income tax return for the deceased

One of your most important estate administration obligations is settling the decedent’s income tax for a final time. You will need to file a return on the decedent’s behalf, even if they were past retirement and did not have any income at the time of their death.

The necessity to pay income taxes on the estate itself

It’s quite common for testators to leave instructions for an executor to sell some of their assets and divide the proceeds from that sale among their beneficiaries. You will have to file an income tax return on behalf of the state and the individual who died if the former generates more than $600 in income via the sale of property. 

Learning about tax obligations during estate administration can help you avoid making mistakes that could affect you or the estate’s beneficiaries.