What Taxes Should Be Filed After a Death?
We all know Benjamin Franklin’s famous quote, “In this world, nothing can be said to be certain, except death and taxes.” This 18th century mantra holds true today. We all face these two certainties in our lifetime. But the reality is, even after your death, taxes endure.
If you’re unsure of any of the terminology used in this article, please refer to our After a Death Glossary.
So what taxes need to be filed after a death?
Income Tax Return:
A final income tax return may need to be filed for you, and it may be necessary for your estate and your trust (if you had one) to file their own income tax returns. You (as the decedent) and your estate are separate taxable entities. Whether your estate or trust will need to file income tax returns will depend on the type of assets you owned, what your will or trust says and what your personal representative or trustee does with them after your death. To learn more about whether estate or trust income tax returns are required, visit the IRS page on Deceased Taxpayers: Filing the Income Tax Return.
Massachusetts Estate Tax Return:
An estate tax return may also need to be filed. In 2018, if a Massachusetts decedent’s taxable estate exceeds $1 million, an estate tax return will need to be filed. Keep in mind that even if your assets are below that mark, you may need to file Massachusetts estate tax returns, if you made taxable gifts.
Federal Estate TaxFederal Estate Tax: The federal estate is part of a unified federal gift and estate tax that is an excise on the transfer of wealth. Read More Return:
In 2018, a federal estate taxFederal Estate Tax: The federal estate is part of a unified federal gift and estate tax that is an excise on the transfer of wealth. Read More return will need to be filed if your taxable estate exceeds $11.18 million, although there are good reasons to file one even if the estate does not exceed this amount. One reason is that filing a federal estate taxFederal Estate Tax: The federal estate is part of a unified federal gift and estate tax that is an excise on the transfer of wealth. Read More return would allow your spouse to shield more than $11.18 million from estate taxes. Another reason for filing is that the $11.18 million is set to revert back to $5 million (plus inflation) in 2025. Also, filing even if you are below the $11.18 million mark could help clear up capital gains issues in the future when and if your heirs sell your assets.
Need Assistance with this? Learn more about our TrustCASE™ program, which is a collaborative effort among family, trustees/ executors and lawyers to administer and settle estates.
