Probate administration is a heavy burden to bear. At the same time that you are grieving the loss of a loved one, you simultaneously have to handle legal and financial matters for them. Locating and distributing their property, as well as handling their business and financial needs, can require a substantial amount of time.
You have an obligation to the estate and its beneficiaries to handle things as well as possible. In fact, as the executor, you can have some personal responsibility for unpaid taxes or possibly even private debts. If you distribute property from the estate without handling outstanding financial obligations, taxing authorities or creditors could hold you personally responsible.
Obviously, you don’t want to end up responsible for paying someone else’s taxes or credit card debt, so caution is of the utmost importance during probate administration. Familiarizing yourself with the various financial responsibilities and requirements placed on executors and estates is an important step toward protecting yourself from a major oversight. Estate taxes can be a significant financial burden. When do you have to worry about paying them?
Estates in New York could be subject to federal and state taxation
When someone dies, the government can collect a tax if the total value of the estate is above a set amount. Federal estate taxes only apply to estates that are worth $11.7 million or more. However, New York also assesses an estate tax, and the threshold for taxation is lower than the federal one. The estate only needs to have assets worth $5,930,000 to be subject to taxes.
You may have to pay taxes for the sale of estate
Whether you sell real estate or stock as part of estate administration, if the estate earns $600 or more through such transactions, you will likely need to file an income tax return for the estate the following year.
There could be other taxes that apply as well. You will have to handle tax returns for the deceased individual and sometimes an inheritance tax. The more you understand about taxes and estate obligations, the less likely it will be that you make an estate administration mistake that affects your finances or the solvency of the estate.