Serving as the executor or personal representative of an estate is often a thankless job. Your friend or family member who asked you to handle their affairs is no longer present to express their gratitude, and the beneficiaries receiving property from the estate are often more entitled than grateful.
You may have to miss work to attend court and manage an estate sale, to say nothing of the hours you may spend on the phone with creditors and utility companies. You must ensure that you take the right steps, or you can potentially be liable for some of the mistakes that you make related to debts and taxes.
There are many taxes that may become your responsibility during estate administration. What taxes may you need to file and pay?
Estate taxes
Florida doesn’t have an estate tax, but the federal government does. Anyone who dies in Florida with property worth more than the exemption limit, which is $12,060,000 in 2022, will have some of their estates end up going toward taxes.
Income taxes
It is often the responsibility of the estate to file a final income tax return for someone who dies. Even if an individual already retired, a final tax return is necessary the year after they die to notify the IRS of their death and to settle any outstanding tax obligations.
This can help prevent fraud, such as someone using their social security number illegally. It will also make you aware of any amount the estate may need to pay for an income tax debt. If the estate instructions include selling assets in an estate sale, then you may eventually need to file an income tax return for the estate as well. Proceeds in excess of $400 will trigger this responsibility.
Taxes for the beneficiaries
Sometimes, there are tax implications to a bequest for the beneficiaries of an estate. There could be capital gains taxes due after the distribution of certain property or the transfer of real estate. Those taxes could impose a financial burden on the beneficiaries, which is why early communication with them about the size of their inheritance will be important.
As with unpaid debts, you could have some personal liability for taxes that you fail to properly file. Learning more about the responsibilities involved in estate administration will help you fill your duties effectively while minimizing your personal liability.