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The Most Important Tax Issues to Consider If You Are an Executor, Trustee, Or Administrator


There are a number of key tax questions that pop up when a loved one passes away and you are responsible for their estate as the executor. Below, we discuss some of the most important considerations to take into account if you are responsible for an estate:

General Responsibilities

The executor of an estate is the individual who essentially manages the financial aspects of the state once the decedent passes away (if it is a family trust, the individual is identified as the trustee, and if there is no will or trust, the probate court appoints an administrator). Each of these individuals do roughly the same job of identifying assets, paying off debts, and distributing remainders to named beneficiaries and heirs. Executors also have to file tax returns and pay taxes.

Capital Gains Assets

When it comes to holding this responsibility, the corresponding tax issues can become somewhat complicated. If for example the decedent left a capital gain asset (i.e. property, for example), his or her heirs can increase the federal income tax basis of that asset to reflect the fair market value; either based on a valuation date of six months later; or based on the date the decedent passed. When that capital gain asset is sold, the federal capital gains tax owed is on the appreciation that occurs after this date, and this can dramatically lower the amount of taxes owed.

Selling Principal Residences

Unmarried individuals and married couples can exclude a certain amount of financial gain from selling a principal residence from federal tax income tax application. For an unmarried individual, for example, this is $250,000, and for a married joint filing couple, this is $500,000. Surviving spouses are typically not allowed to file joint returns after the decedent dies unless they otherwise qualify as a widower or get remarried. In addition, unmarried surviving spouses can claim   $500,000 gain exclusion for the sale of a principal residence if it occurs within two years after the decedent passes. Note that, in these circumstances, it is very important to stick to the deadlines, as anything beyond that 24 more months after the date of the decedent’s death will not qualify.

Required Minimum Distribution (RMD) Rules For Inherited Retirement Accounts (IRAs)

When it comes to required minimum distribution (RMD) rules for inherited retirement accounts (IRAs), beneficiaries absolutely cannot afford to ignore them. Failure to withdraw this minimum distribution exposes beneficiaries to a 50 percent penalty, and this can occur year after year. Also note that special required minimum distribution rules apply if the decedent’s surviving spouse is the sole beneficiary of the IRA and this distribution may need to be taken before an entire year has passed. Special rules also apply when non-spouse beneficiaries inherit IRAs and this can become especially complicated if there are accounts with multiple designated beneficiaries.

Contact Our Florida Estate Planning Attorneys with Any Questions

If you live in Florida and have any questions about how best to perform your executor duties—or any other questions related to estate planning and/or probate—contact our experienced Orlando estate planning attorneys today at Gierach and Gierach, P.A. for a free consultation.




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