If you offer to serve as executor for your parents or if they need you as the administrator of their estate in their last will, you have a lot of responsibilities ahead of you.
You will have to pay off all of their creditors, inventory their property and distribute their assets to their beneficiaries. You will also likely have the responsibility to handle some tax obligation on their behalf. What taxes are your responsibility to file as the executor of an estate?
You have to file a final tax return for the deceased
When people get older, they may no longer need to file an income tax return. However, even if it has been years since your parents had a statutory obligation to file a tax return with the IRS, he will have to file a final return for the year that they died. This helps to finalize and resolve any obligations your parents may have had.
You may have to file tax paperwork for the estate
Will you have to liquidate major assets, sell stocks or list a piece of real estate as part of estate administration? The more valuable the property that you sell or transfer, the greater the possibility that the estate will have more than $600 worth of revenue so that you will have to report it.
There may be estate taxes that apply
Tennessee is one of many states that do not assess inheritance or estate taxes. Neither the estate itself nor its beneficiaries have to pay money to the state of Tennessee regardless of the size of an inheritance. However, for estates worth more than $11.7 million, the possibility exists for federal taxation to affect the estate.
You may have to report compensation that you earned as executor
For many people, serving as an executor is a thankless and unpaid job. However, some people set aside compensation in their last will for their executor. Depending on the structure of that compensation, it might be a form of payment rather than an inheritance, which may mean you have to report it for tax purposes.
Making mistakes with taxes during estate administration can result in financial liability for you as the executor. Getting good legal guidance on probate proceedings and especially on financial and tax liabilities can protect you from financial risks when handling a loved one’s estate.