Understanding Estate Tax

Tax season does not typically invoke excitement in many people, other than possibly accountants. Unfortunately, even after death taxes are still unavoidable. They can even be a lingering task to be completed years after death depending on the complexity of the estate.

Final Tax Return

What time of year you die affects your taxes for your last year of life. Your estate trustee is responsible for gathering your tax information and filing your final return for the year after you pass. Logistically speaking it is easiest to file a final return for someone who passed away closer to the end of the year as documents are fresh at hand from dealing with the estate. If a person passes away in the earlier part of the year, then their final return cannot be filed until the following tax year. This of course means that the estate trustee will be responsible for gathering all of the vital tax information almost a year after the death itself. For the unorganized, this can be problematic.

Filing Dates

There are also specific filing due dates for estate tax returns which have to do with the date of death. If the person passed between January 1 and October 31, the final tax return is due April 30 the following year. If the person passed away between November 1 and December 31 the due date for the final return is six months after the date of death. The time limits are in place to allow sufficient time for the estate trustees to accumulate all required information as it is at times challenging to locate. It also provides for additional time in order to sell any real estate that the estate is interested in selling. There may be capital gains to pay after certain property sales and this amount needs to be added to the deceased’s income for their final tax return.

Estate Returns in Subsequent Years

Even after the final tax return is filed, if the estate is earning money, for example via interest on investments, then every year an estate return must be filed. Working with an accountant will ensure that the estate trustee captures all applicable income that needs to be included.

No one likes to file taxes, and it’s especially difficult to do so when also dealing with the loss of a loved one. However there are lots of resources available to those who require assistance and it never hurts to have the advice of a lawyer in estate tax matters. Some estates can go for years without being settled and will require continuous involvement from the estate trustees. Be certain that if you are an estate trustee that you know what is expected of you and ensure all filing deadlines are met. Contact Court Coach LLP for a no-obligation consultation to learn more about Wills and Estates.