If you are planning to execute your beneficiary’s last will and testament, it is important that you prepare a Final Estate Tax Return before you file your actual estate tax return with the IRS. Preparing a return to the IRS before you file your actual tax return will help ensure that you do not commit any errors or omissions in preparing your return. In this article, I’ll outline the most important reasons why preparing a Final Estate Tax Return is so important. I’ll also provide a sample template that you can use for preparing your return. Finally, I’ll discuss some considerations you need to keep in mind when preparing your return.
Overview. You’ve reached the final step of your deceased person’s estate plan, congratulations. Now that you’ve paid all taxes and determined the value of your deceased person’s estate, understand what it consists of and exactly how it is distributed to your named beneficiaries. For most estates, the majority of estates leave the bulk of the proceeds to be divided among the spouse, children, and children’s parents (the named beneficiaries) and between the surviving spouse and the remaining beneficiaries if there are any. If there are not enough designated beneficiaries to cover the total estate assets, then the bulk of the estate assets are distributed to the living beneficiaries, called the distributee’s beneficiaries.
Who should execute my estate? If your deceased person had no children, then the answer to who should execute the estate is you. If your deceased had one child, then the answer to who should execute the estate is the child (Ren). Regardless of who actually executes the estate, the question remains: how much control do you want to have over the estate?
If you want to have a lot of control over the distribution of your estate, then you’re probably going to need a lawyer to fill out and file your final tax return. If the decedent had no children, then the answer to who should execute the estate is you. Even if the decedent had one or two children, then the question of who should execute the estate can only be answered by the children. Therefore, if you want more control over the distribution of your final tax return, then you’re going to need an estate planning attorney to fill out and file your return for you.
Who gets to keep what belongs to whom after the distribution? Another frequently asked question when dealing with estate administration is who gets to keep what belongs to whom after the distribution. In short, assets are distributed according to “legally” defined distribution guidelines. Those distribution guidelines are usually described in a document called a last will and testament. Under the laws of many states, some or all of your assets will remain with your surviving spouse, children, and children’s other relatives. Others will be distributed according to your state’s allocation formula.
If the decedent was a US citizen, there are special rules regarding capital gains and inheritance taxes. Although both of you could have been granted a qualified property interest in the decedent’s property, there could be a difference in the amount of tax that is owed on the property for capital gain and the amount of tax that is owed on the inheritance. In this situation, the executor may recommend that the federal estate tax is paid. This can be done by either making payments to the IRS or by proceeding with the IRS before the final tax return has been filed jointly with the decedent’s estate.