How to Settle an Estate by Charles K. Plotnick

Author:Charles K. Plotnick
Language: eng
Format: epub
Publisher: Penguin Publishing Group

Allocation of the Tax Among the Beneficiaries

In most states the executor is responsible for paying state death taxes, but this responsibility applies only to property passing through the probate estate. In many cases, nonprobate property is also subject to inheritance tax. Property held in the names of two brothers, for example, might pass to the surviving brother. The surviving brother, and not the executor, has the responsibility of paying the state inheritance tax on the share of the property owned by the deceased. In spite of this, however, the executor may still be responsible for advising the state of the fact that the decedent died owning property jointly with his brother. Therefore, be careful to include all required information concerning the decedent’s assets on the state death-tax return.

If the decedent left a will, then examine the provisions of the will to determine where the tax burden lies. For example, if the decedent bequeathed certain gifts to his children and left the residue of his estate to his wife, and if the will indicates that all taxes shall be paid from the residue of the estate, the children will receive their gifts free of any tax obligations.

Examine state death-tax laws to determine whether a particular tax should be apportioned pro rata among the estate’s beneficiaries, charged to certain named beneficiaries, or paid from the residuary portion of the estate. In the case of property left to an individual under a will, that individual is often responsible for the inheritance tax on that property. Unfortunately, every case is not that clear, and you therefore have two distinct responsibilities: (1) to be certain of the amount of the tax and make payment, and (2) to allocate the tax burden to the proper beneficiary.

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