Serving as an executor or administrator for an estate means dealing with a lot of details, forgotten possessions and unhappy family member. Between Pennsylvania probate court and family squabbles, you may have a lot of issues to manage as you handle the estate of a loved one.
However, your role isn’t just to distribute the assets your deceased loved one acquired during life. As executor or administrator, you must also fulfill their legal and financial obligations. In other words, you will have very specific tax responsibilities. Failing to fulfill those responsibilities could leave you and beneficiaries from the estate legally and financially vulnerable.
You have an obligation to file a final tax return
Even if your loved one was already retired and living on Social Security benefits at the time of their death, there needs to be a final tax return filed for the last year of their life, and it is your responsibility to do so. Additionally, you need to advise the IRS that this particular taxpayer has died. Filing that final tax return is a very important step for fulfilling all of the financial obligations of the testator.
You may have to manage estate taxes for very large estates
The larger the value of the assets within the estate, the greater the risk of potential estate taxes. Although Pennsylvania does not charge state taxes, individual heir and beneficiaries may be subject to state inheritance taxes.
Estates with a total value of more than $11.58 million that go through probate administration in 2020 will likely be subject to federal estate taxes, unless the testator took extra steps, such as the creation of a trust, to avoid those tax liabilities.