Tax obligations are a big part of what an executor’s job in handling an estate. Estates may be subject to taxation based on their overall value, which an executor has an obligation to manage. Although Nevada does not have an estate tax, the federal government does for estates that involve millions of dollars of assets.
The person administrating an estate also has to file a final tax return on behalf of the deceased individual, even if they weren’t filing tax returns on their own behalf in their final years. An executor typically has to meet all tax and debt requirements before they start distributing assets to heirs and beneficiaries.
There is another tax obligation that executors could easily overlook if they aren’t intimately familiar with tax rules. When might the estate require a tax return?
Estates that generate revenue or income may be subject to taxation
The Internal Revenue Service (IRS) expects people to pay taxes on any source of revenue that exceeds certain minimums. For revenue generated by in a state, possibly through the rental of real estate holdings or the sale of assets, income in excess of $600 will lead to tax return requirement. An executor must declare that income and pay tax on it on behalf of the estate or possibly leave themselves at risk for liability due to those unpaid taxes.
Understanding all of the financial obligations that come with estate administration might require legal assistance. Rather than leaving yourself vulnerable, it is usually best to get help early in the process to ensure you don’t make mistakes for which you could be legally and financially accountable.