ESTATE & FIDUCIARY TAX MATTERS

Tax considerations are often one of the more overlooked aspects of estate administration, until a deadline is missed or a question comes up that the personal representative wasn't expecting. While the vast majority of estates fall well below the federal estate tax exemption threshold, larger estates may need to address federal estate tax filings, and nearly every estate that generates income during administration will need to address fiduciary income tax.

Federal Estate Tax Considerations
For estates that exceed the federal estate tax exemption, or for surviving spouses who want to preserve a deceased spouse's unused exemption through a "portability" election, a federal estate tax return (Form 706) may need to be filed. This is true even when no tax is ultimately owed, if the family wants to take advantage of portability for future planning. Knowing whether this filing applies, and the deadline for making it, is an early decision point that shouldn't be missed.

Fiduciary Income Tax
While an estate is being administered, any income it generates: interest, dividends, rental income, or gains from the sale of assets,  generally needs to be reported on a fiduciary income tax return (Form 1041) for the estate itself. Personal representatives are responsible for ensuring these returns are filed for as long as the estate remains open and generating income.

Basis and Valuation Questions
The value of estate assets as of the date of death often becomes important down the road — for example, when a beneficiary later sells an inherited property and needs to know their basis for capital gains purposes. Establishing accurate valuations early in the administration process can prevent headaches for beneficiaries years later.

How We Help
Beck, Payne, Frank & Piper, P.C. does not prepare tax returns, but we work closely with the estate's accountant or the personal representative's own tax professional to identify which filings and elections may be relevant, flag important deadlines, and make sure tax considerations are factored into decisions about the timing of asset sales and distributions. If the estate doesn't already have a CPA involved, we're happy to make a referral.

Getting tax questions addressed early, rather than after assets have already been distributed, can save significant time, expense, and stress later on.

Talk to Us About Estate Tax Considerations

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