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What are some of the important tax issues associated with probate?

On Behalf of | Feb 4, 2016 | Estate Administration

As the saying goes, nothing is really certain in this world expect death and taxes. Interestingly enough, these two inevitabilities actually converge for personal representatives, meaning those appointed by either a will or a probate court to administer the estate of a recently deceased person.

That’s because in addition to such duties as gathering probate assets, paying valid creditor claims and distributing assets among heirs, the personal representative is also responsible for filing any necessary tax returns.

Indeed, this duty takes on added significance at this time of the year seeing as the tax season is officially upon us.

What happens in terms of tax consequences upon a person’s passing?

When a person passes away, there are essentially two major tax consequences. First, it will mean that this is the last tax year for the decedent as far as filing a federal return is concerned. Second, it establishes the estate as a new tax entity.

What are the tax returns that the personal representative will be responsible for filing?

While every estate is different, personal representatives frequently end up filing one or more of the following:

  • A federal income tax return (Form 1040)
  • A federal income tax return for the estate (Form 1041)
  • A federal estate tax return (Form 706)
  • A federal gift tax return (Form 709)

Would a personal representative ever be held personally liable for the tax owed by either the estate or the deceased to the IRS?

In general, any tax debt owed by the estate or the deceased are covered by the probate assets of the estate, meaning the personal representative is not personally responsible.

The only possible exception would be where the personal representative has not taken steps to ensure the taxes owed were properly covered.

Would a personal representative have to be concerned with any taxes being owed to the State of Florida?

The personal representative would generally not have to be concerned with either filing requirements or tax obligations to the state. The only possible exception would be if the deceased owed any intangible taxes from any year prior to the abolishment of the intangibles tax on January 1, 2007.

As you can plainly see, serving as a personal representative is not any easy task by any means. As such, those who find themselves in this role should give serious consideration to speaking with a legal professional who is well versed in the area of probate administration


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