General Responsibilities of an Estate Administrator
When a person dies a probate proceeding may be opened. Depending on state law, probate will generally open within 30 to 90-days from the date of death.
One of the probate court’s first actions will be to appoint a legal representative for the decedent and his or her estate. The legal representative may be a surviving spouse, other family members, the executor named in the decedent’s will or an attorney. We will use the term “estate administrator” to refer to the appointed legal representative. The probate court will issue Letters Testamentary authorizing the estate administrator of the decedent to act on the decedent’s behalf. You will need the Letters Testamentary to handle the decedent’s tax and other matters.
In general, the responsibilities of an estate administrator are to collect all the decedent’s assets, pay creditors and distribute the remaining assets to heirs or other beneficiaries. As an estate administrator, your first responsibility is to provide the probate court with an accounting of the decedent’s assets and debts. Some assets may need to be appraised to determine their value. All debts will need to be verified and creditor claims against the estate must be filed. How to verify a federal tax debt is covered in the Getting Information from the IRS page. How to get IRS to file a creditor claim in the probate proceeding is covered on the Getting the IRS to File a Proof of Claim in a Probate Proceeding page.
Tax Responsibilities of an Estate Administrator
A decedent and their estate are separate taxable entities. So if filing requirements are satisfied, an estate administrator may have to file different types of tax returns.
First, an estate administrator may need to file income tax returns for the decedent (Form 1040 series). The decedent’s Form 1040 for the year of death, and for any preceding years for which a return was not filed, is required if the decedent’s income for those years was above the filing requirement.
Second, an estate administrator may need to file income tax returns for the estate (Form 1041). To file this return you will need to get a tax identification number for the estate (called an employer identification number or EIN). An estate is required to file an income tax return if assets of the estate generate more than $600 in annual income. For example, if the decedent had interest, dividend or rental income when alive, then after death that income becomes income of the estate and may trigger the requirement to file an estate income tax return.
If the estate operates a business after the owner’s death, the estate administrator is required to secure a new employer identification number for the business, report wages or income under the new EIN and pay any taxes that are due. Publication 1635, Understanding Your EIN provides information about this requirement.
Some or all of the information you need to file income tax returns for the decedent and their estate may be in the decedent’s personal records. The IRS can help by providing copies of income documents (Forms W-2 or 1099 for example) and copies of filed tax returns or transcripts of tax accounts.
Third, an estate administrator may need to file an estate tax return (Form 706). The estate tax is a tax on the transfer of assets from the decedent to their heirs and beneficiaries. In general, the estate tax only applies to large estates.
Source: IRS: www.irs.gov