Financial obligations are a top priority during estate administration. Personal representatives must identify creditors and provide them with written notice so that they have an opportunity to file a claim against the estate.
They also frequently need to retain estate funds for the purpose of paying certain taxes. There are multiple different taxes that can influence estate administration in New Jersey, and personal representatives need to ensure they fulfill those obligations to protect themselves from liability.
What taxes may an estate need to pay after a person dies?
Income taxes
It is standard for the personal representative administering the estate to file the final tax return for the deceased person. They need to report the passing and reconcile the decedent’s income tax responsibilities.
If the sale of estate resources occurs, proceeds in excess of $600 may make an income tax return for the estate necessary as well. Personal representatives must ensure they properly file returns and pay any taxes due using estate resources.
Estate and inheritance taxes
New Jersey does not currently assess an estate tax. However, the federal government does. Multi-million dollar estates may need to pay a federal estate tax with a rate between 18 and 40%.
There may also be inheritance taxes to consider. While the estate does not technically pay those taxes, the personal representative may need to communicate with beneficiaries about their financial obligations. Doing so can prevent scenarios in which beneficiaries end up unable to fulfill their financial obligations.
Identifying and addressing tax responsibilities is a key component of estate administration. Personal representatives may need help identifying financial obligations and taking appropriate steps to fulfill them, and that’s okay. Seeking personalized legal guidance is always an option.