Working as a personal representative or executor is more than just stressful. It is also potentially a source of family disputes and financial liability. Those administering estates should follow the instructions provided by the decedent, as well as all applicable state laws.
The personal representative has a fiduciary duty to act in the best interests of beneficiaries or heirs. They also have a legal obligation to fulfill the financial responsibilities of the deceased individual.
Doing so may diminish what beneficiaries or heirs inherit. However, the failure to use resources to address financial obligations can lead to direct liability for the personal representative. Taxes are one potential source of liability during estate administration.
What taxes are due?
There are two main tax considerations during a state administration. The first is income taxes. Personal representatives may need to file income tax returns on behalf of the people who have died.
If they sell assets during estate administration, they may also need to file an income tax return for the estate itself. Net proceeds in excess of $600 make such returns mandatory, and they could be due multiple years in a row if estate administration stretches beyond a single calendar year.
Additionally, if the estate is worth millions of dollars, then estate taxes could be due as well. Personal representatives must ensure they file appropriate tax paperwork and reserve resources to cover those obligations.
Fulfilling financial obligations helps protect personal representatives from liability and attempts to remove them from their position. Those who work with an attorney familiar with probate proceedings and estate administration can learn about their responsibilities and minimize their liability.