When an estate enters probate, the court appoints an administrator to manage transactions and carry out tasks on behalf of the deceased. As a legal representative, this person must complete various tasks regarding the estate. Their responsibilities usually include creating an inventory of assets, paying the deceased’s debts and handling the estate’s distribution to all beneficiaries.
The administrator should consider the tax-related requirements once the probate process begins. After appraising the estate’s assets, verifying the deceased’s debts and consulting the IRS for proof of claim, they must proceed by organizing tax returns and transcripts. They must also file the following based on the estate’s and the deceased’s details:
- The deceased’s tax returns: This requirement includes the year the decedent passed away and any unfiled years before their death.
- The estate’s tax returns: These are tax returns on the estate. Before filing this requirement, the administrator must obtain a tax identification number for the estate. Although, this step might only be necessary for estates with assets earning over $600 annually. The estate might also need multiple identification numbers if it consists of businesses operating after the deceased’s death.
- Estate tax returns: They are taxes for transferring assets to the deceased’s beneficiaries. This step is usually necessary for significant estates.
Sometimes, the type of assets within the estate can impact the appropriate way to file tax returns. Administrators should contact the IRS if the estate has unique characteristics affecting the proper filing procedure.
Preparing to complete tax-related tasks
Estate administrators require organizational skills because they might need to sort through countless pieces of paperwork even before performing their primary duties. They also need to receive documents from the probate court to address and resolve tax-related issues. Fortunately, they can prepare by seeking accounting and legal counsel early in the process.