Estate administration involves settling someone’s affairs. This process generally entails carrying out their last wishes and also fulfilling any unmet financial obligations. Personal representatives have to review financial records to identify creditors. They have to retain funds to ensure that they can pay off debts and cover any tax obligations. The estate has responsibility for taxes that might otherwise be the obligation of the deceased individual.
What taxes does a personal representative need to ensure that they cover in order to protect themselves from liability during estate administration?
Several different taxes may apply
There are generally two types of taxes that a personal representative may need to address. Many people worry about estate taxes in particular. Estate taxes can be quite costly depending on the total value of the estate.
North Dakota does not collect an estate tax, which means that only the federal estate tax applies. If the estate is worth more than $13.99 million, then the personal representative may need to prepare to cover estate tax obligations.
Otherwise, income taxes are the most likely financial obligation that they must address. Personal representatives typically file a final tax return on behalf of the deceased individual. They may also need to file an income tax return on behalf of the estate if they liquidate any assets during estate administration and generate $600 or more in revenue.
Ensuring compliance with financial obligations, including filing and paying taxes, is a key component of effective estate administration. Personal representatives may need help ensuring that they fulfill all financial obligations and retain enough resources to cover all applicable tax obligations, and that’s okay.