Estate Tax Returns
Almost everyone knows the saying: Nothing is certain except death and taxes1. Not only are these both certainties, but also go hand in hand, since you may have to pay taxes even after your death. Since a deceased person us obviously unable to handle such affairs, the task of paying taxes—as well as many other things—falls to the executor of the estate. An executor is a person named in the will to handle all affairs of the estate during probate, including payments of debts, disposition of wealth, and yes, paying taxes.
First, an executor must determine what types of tax returns for the estate are required. You will have to file an income tax returns if they are applicable. Next, you will have to evaluate whether estate tax returns are necessary.
Federal Estate Taxes
Since the passage of the American Taxpayer Relief Act of 20122, only those with substantial wealth will be subject to estate tax. Though the actual threshold changes each year based on inflation, for 2014, anyone with an estate worth less than $5.34 million is exempt from paying any federal estate taxes. Additionally, any property left to a surviving spouse is passed on automatically tax-free. A spouse may then use any estate tax exemption not used by the spouse who died first. This means that if you died and left $5 million to your spouse (which is not subject to tax or exemption), and your spouse later died with an estate of $9 million, your spouse could use both your unused exemption as well as their own, so all $9 million would be tax-free despite exceeding the individual exemption.
Washington State Taxes
The state of Washington currently requires estate tax to be paid on any estate worth more than $2,012,000. Therefore, if you are a resident of Washington with over this amount of wealth or own substantial property within the state, your executor may have to file a state estate tax return. Though any property left to your spouse passes tax-free, Washington does NOT allow your spouse to use any unused exemptions like the federal law does.
Taxes after a death can be confusing and, as an executor, you do not want to risk failing to file all appropriate returns. Always contact an experienced probate attorney at the Dickson Frohlich in Seattle or Tacoma for guidance. Call us at (206) 621-1110 or (253) 572-1000 for help today.