It’s very common for people to owe taxes after they pass away. You may have had an income that year that you still have to pay taxes on when the year comes to a close, for instance. You may also have to deal with things like property taxes on your house or a vacation home. If you pass away unexpectedly, these bills may go unpaid.
You’ll often hear people say that the estate administrator is the one who is asked to take care of it. This is the person in charge of administering the entire estate, which means giving assets to your heirs and following the will to make sure the beneficiaries get what they deserve. During this time, the administrator also pays the taxes. But how do they do it?
They pay out of your estate
If you’re worried about leaving your estate administrator – or estate executor – with a massive tax bill that they can’t afford, don’t be. They don’t have to personally pay your taxes. They just have to pay it out of your estate.
For instance, say that you have a certain amount of money that you want to split between your heirs. The will is going to tell the administrator what total amounts are supposed to go to which heirs. But the administrator first has to take the money from the estate and pay off the taxes and other debts, and then they can split up the money that is left.
So, while the administrator doesn’t have to come up with this money on their own, it could mean that your heirs don’t get as much money as they expected. This could include your administrator if they are also one of the beneficiaries. That’s why you want to have some sort of a tax payment plan in place in advance, such as setting up a trust to take care of it. This way, the total amount that you want to give to your heirs is still known and fulfilled.
Creating an estate plan
Paying taxes is just one part of an estate plan. Be sure you know how to create a plan that is going to be ideal for your family.