Paying all taxes due is a top responsibility during estate administration. Personal representatives often file final income tax returns for deceased individuals. The estate assumes responsibility for the decedent’s financial obligations, including any outstanding income taxes.
In some cases, the estate itself might actually owe taxes. Personal representatives may need to file returns and use estate resources to cover any applicable taxes. When might an estate owe taxes?
When the estate contains millions in assets
South Carolina does not collect an estate tax. However, the estates probated in South Carolina are subject to federal estate taxes.
If the total value of the estate is $15 million or more, then federal estate taxes may be due. Personal representatives may need to retain between 18 and 40% of the total value of the estate to cover those obligations.
When asset liquidation occurs
Estates that are not subject to estate taxes might instead owe income taxes. Personal representatives frequently liquidate property, possibly by conducting estate sales.
If the sale of estate resources generates $600 or more in revenue, then the estate might owe income taxes on the sale revenue. Depending on the duration of estate administration, an estate could potentially owe income taxes in more than one year.
Unpaid taxes are among the financial obligations that may transfer to personal representatives. Having guidance throughout estate administration reduces the likelihood of mistakes that can lead to liability for personal representatives. The support of an attorney makes it easier for personal representatives to fulfill the financial obligations of the person who died and the estate itself.