There are a number of tax forms you may need to file in your role as executor. EstateExec will help you determine which tax forms are applicable and their due dates, listing them in the Tasks tab.
Decedent Income Tax Returns
An executor is responsible for filing final personal income tax returns for the decedent. These returns are due at the normal time (typically April 15 of the year following death), but only cover the preceding year until the day of death (after which, the estate becomes responsible and must submit its own tax returns). IRS publication 559 provides federal instructions for this, but it's generally easier just to use Intuit TurboTax® or a tax accountant.
If the decedent had not yet filed tax returns for the year previous to his or her death (imagine that he or she died on January 15), then you are responsible for filing those previous year returns as well, by their normal due dates.
If the decedent already filed his or her taxes for a previous year and a federal refund is due, you can collect it by filing an IRS Form 1310 for the appropriate year. Note that any state refunds are taxable by the federal government, and so could be a taxable event for the estate.
- Minimum Income: As with any taxpayer, income tax forms generally need to be filed only if the decedent earned more than a minimum amount during the year, as set by federal and state law (see federal filing tester).
- Medical Deductions: If the decedent incurred large medical costs in the year of death (this is common), remember that you may be able to deduct much of those expenses (see IRS medical deduction overview, and MarketWatch explanation). To qualify, the decedent must have actually paid those expenses before death, or the estate must pay them within one year of death. Alternately, if the estate is large and owes estate tax (this is uncommon), you can instead deduct final medical expenses on the estate tax form, which usually saves more money.
- Surviving Spouse: If the decedent is survived by a spouse who has not remarried, then the final income tax filing can be made as a joint return (counting the decedent's income and deductions only through the date of death), which usually results in a lower tax bill than filing separate returns. Note that under certain circumstances, the surviving spouse may also be able to continue filing "joint" returns for an additional 2 years (see IRS Tax Benefits for Survivors for details).
- Revocable Living Trusts: If the decedent held a living trust, income from that trust during the portion of the tax-year in which the decedent was alive should be reported on the the decedent's income tax return, just as it was during prior years of the decedent's life. Once all owners of a revocable living trust pass away, the trust becomes irrevocable and is considered as a "taxpayer" in its own right, responsible for filing its own income taxes going forward. Of course, this then becomes the responsibility of the trustee(s), not the estate executor (see Trusts).
Annual Estate Income Tax Returns
An estate must file a federal IRS Form 1041 every year it earns over a minimum amount (~$600) until you completely wind down the estate. If you file a federal form, you must file the corresponding state form.
Annual Property Taxes
If the estate contains real property, you must pay any relevant property taxes until the property is either sold or distributed to the heirs. Property taxes are often due in two installments during the calendar year; due dates vary widely by jurisdiction.
Note that paying property taxes in North Carolina from estate funds requires explicit authorization by the will or the court, since real property in NC is considered to immediately vest to the heirs (even though in reality the executor retains control throughout much of the settlement process).
Annual Trust Tax Filings
As mentioned above, income from a decedent's living trust must be reported on the decedent's annual personal income tax return, up until the point of death. After death, income from such a trust starts accruing to the benefit of the trust beneficiaries, and the trust must report any income it distributes via Federal Schedule K-1s, which must be mailed by March 31 of the year following the decedent's death (and every year thereafter that the trust distributes income). Any income not distributed in a given year must be handled via the trust's own federal (Form 1041) and state tax filings. Of course, managing a trust is the responsibility of the trust trustee, not the estate executor (see Trusts).
The "Big Estate" Tax
If you are dealing with a large estate, you have 9 months from the time of death to submit a federal Form 706. This form is required, for example, if the gross value of an estate whose decedent died in 2022, plus any inflation-adjusted taxable gifts made by the decedent during his or her lifetime, exceeds $12.06M. For decedents who died in earlier years, the limits were $11.18M in 2018, $11.4M in 2019, $11.58M in 2020, and $11.7M in 2021. (see Sample Estate Task: Submit Form 706 for your particular estate requirements). Just because you have to file this form does not mean the estate will owe any taxes, since taxes are calculated on estate net value. A 6-month extension is available if requested prior to the due date and the estimated correct amount of tax is paid before the due date.
Even if you are not required to file a Form 706, it may be to the advantage of any surviving spouse to do so, since filing a Form 706 grants any unused exemption amount to a surviving spouse. For example, if someone died leaving behind a $3M estate, and the exemption amount that year was $11M, a surviving spouse would gain an additional $8M for his or her eventual exemption amount, potentially reducing his or her eventual tax burden.
If you file a federal Form 706, you must also file IRS Form 8971 identifying heirs, the inherited property, and its valuation. This additional form must be delivered by the earlier of 30 days after the estate tax return is filed, or 30 days after the estate tax return was due to be filed (if you missed the 706 deadline).
If the estate does owe federal estate tax, note that you have the option to establish an Alternate Valuation Date, which basically allows the executor to define the value as of 6 months after death (if doing so would reduce taxes owed), as opposed to the value on the date of death. You must make this election within one year, and it is irrevocable. See Federal Statute 26 USCS § 2032.
You may also have to file a state estate tax form if the decedent lived in a state with its own estate tax (in 2022: CT, HI, IL, MA, MD, ME, MN, NY, OR, RI, VT, WA, and WDC). If you are using EstateExec, the Tasks tab will include the relevant information.
If you had to file an IRS Form 706 (i.e., the estate was worth millions of dollars), then it may be a good idea to obtain an Estate Tax Closing Letter before closing the estate. You must wait at least 6 months after filing Form 706 before requesting this Closing Letter (Letter 627). To request this Closing Letter, read the instructions on IRS: Estate Tax Closing Letter and then go to Pay.gov and search for "estate tax" or "closing letter". Alternatively, IRS Notice 2017-12 explains that an account transcript can now be used in place of a Closing Letter. Submit IRS Form 4506-T to request such a transcript (see IRS Transcript Request for instructions).
EstateExec will help you organize all these tasks in accordance with estate value and state of residence. See IRS answers to frequently asked questions about the estate tax, and see Wikipedia on Estate Taxes for an interesting summary.
Unlike an estate tax, which is a tax levied on the overall estate, an inheritance tax is a tax levied on amounts distributed to individual heirs. There is no federal inheritance tax, but a few states do enforce their own inheritance taxes (in accordance with the decedent's state of residence, not the address of the heir): EstateExec will let you know if this is applicable for your estate. Inheritance taxes typically vary by the relationship of the heir (e.g., child, spouse) with the decedent, and it is generally the estate that must pay the tax. If applicable, the inheritance tax form must be filed within 6-18 months, depending on the state.
Discharge of Federal Liability
While not required, you can submit IRS Form 5495 to shorten the period during which you may be personally liable for underpaid federal income, gift, or estate taxes.
Normally the IRS has 3 years to after the submission of any tax return to assess it and request payment of any determined deficiency. Form 5495 shortens this period to 9 months (6 months if you are a professional fiduciary). You are not required to wait for the expiration of this period before making distributions; just be aware that you could be personally required to make up for any underpayments if the estate does not have enough funds to pay, due to your earlier distributions.
You can only apply Form 5495 to tax forms you have submitted, not future ones, so you can wait until all tax forms have been submitted before filing Form 5495, or you can submit additional copies of Form 5495 over time as you file new tax forms.