After all the assets of an estate are collected and valued, the probate process continues with everyone’s least favorite step: making tax payments. Although no one enjoys paying taxes, this is a very important step in closing an estate. If you fail to pay the correct taxes, it will cost you a lot of time and money later. You may not be able to close the estate at all without the proper tax payments.
The personal representative is responsible for making the proper tax payments on the decedent’s estates. In most cases, the personal representative will have to file a final lifetime individual income tax return, usually using federal tax form 1040. This return will only include the income of the decedent up through the date of his or her death. All income made after the decedent’s death will be reported on a separate return for the estate. The estate’s tax return is called the Fiduciary Income Tax Return.
In addition to the federal tax forms, the personal representative will also have to make corresponding Minnesota tax payments. In order to make sure proper tax payments are being made, it is typically advisable to work with an experienced attorney or tax accountant who is familiar with preparing a decedent’s tax returns.
If the tax forms are filed in a timely manner, you may be able to claim certain exceptions that will minimize the tax payments on the estate.
Depending on the total value of the estate, it may also be necessary to file estate tax returns in the state of Minnesota. The thresholds for estate tax can vary, so it’s best to contact an experienced probate attorney to understand the requirements. It’s important to note that estate tax is related to the total value of the estate, not the decedent’s income.
Estate tax returns are often very complex, and they must be filed within nine months of the decedent’s death. Failure to file the returns on time could result in penalties and additional costs to the estate. If the decedent owned property in other states, the personal representative will need to file the appropriate tax forms with those states as well. Tax payments on an estate require a lot of attention to detail. Hiring a good attorney will often reduce the burden.
Making the proper tax payments is an essential part of the probate process that can save you a lot of hassle later down the road. Our lawyers are here to guide you through the process and ensure you don’t make any mistakes. Contact the Brown Law Offices, P.A. at 763-323-6555 for a free consultation.
Find out more about probate in Minnesota by reading Probate Process Step 7: Final Accounting