When Does an Executor Need to File Tax Returns?

An executor has numerous different responsibilities in the process of closing out a person’s estate. Who you choose to serve in this executor or personal representative role is important because he or she may also need to communicate with your loved ones during the process.

Furthermore, there is some complicated steps that must be addressed by the executor, including the filing tax returns. By tax day of the year following their death, an individual income tax return needs to be filed for the deceased person. If that estate earns income during any part of the administration, its own tax identification number can be important to keep track of any potential tax consequences and the earnings as well.

The vast majority of estates do not have enough assets inside them to file federal estate tax returns, but if one is needed, it must be filed and paid within nine months of the date of death. Severe penalties and interests can apply if this deadline is skipped.

Many people installed as executors or personal representatives choose to consult with a knowledgeable probate attorney to verify that they have covered all of their bases in this situation and minimize any possible personal consequences. If you have further questions about how to set your executor up for success by having comprehensive estate planning in place, now is a great time to schedule a consultation with a dedicated estate planning lawyer.

If you think that your executor will need to file a tax return, you can make things easier for them by creating a comprehensive plan and asset list on your end. This can be provided as part of your transfer of information to your executor with your estate planning documents like a will, since this gives an executor a good place to start.

Contact our dedicated NH estate planning lawyers to get started.

What to Consider When Reducing Tax Impacts in Retirement

Looking towards your retirement, you need to think carefully about not just the expenses you might need to pay, but how taxes can impact that landscape. Taxes could reduce the size of your estate that you intend to leave behind for heirs, but they could also influence your overall financial picture.

Investment earnings can be hit hard in your older years when it comes to taxes. An important goal of proper investing is usually maximizing your after-tax returns. Different investments and different kinds of accounts can be taxed differently, which means it is important to consider how you are thinking about the overall growth of your portfolio and the potential tax implications.

Many retirees have established the accounts that are a combination of tax deferred, tax free and taxable. If all of these accounts were taxed the same, then the investor would have no preference into the order in which they would be drawn down.

Because these different kinds of accounts, however, are subject to different types of tax rules and rates, a proper withdrawal sequence is especially important. It is usually recommended, for example, that you withdraw from accounts where required minimum distributions, also known as RMDs, are required.

The second place to tap for distributions are cash flows from taxable accounts followed by tax deferred accounts and then tax free or Roth accounts.

For more information about how your retirement years can be impacted by other unexpected expenses, such as health care expenses, set aside time to speak with a dedicated estate planning lawyer so that you have a comprehensive strategy in place.

Talk to a NH estate planning lawyer today to connect your tax plans to your estate plan.

 

 

 

Two Ways to Protect Your Estate from Taxes

Tax planning is an important component of completing your estate plan and it should always be done under the guidance of an experienced professional. This is because there are many different details to consider in minimizing or avoiding taxes and you want to ensure that you have thought through all of the possibilities.

One of the easiest ways to minimize your tax burden is to put your assets inside a trust. A trust to deal with the assets allows those items to pass to beneficiaries after the creator’s death without having to go through probate. Trusts typically avoid state probate requirements and the expenses aligned with them.

In a revocable trust the grantor can take the assets out if necessary. In an irrevocable trust, however, these assets will be tied up until the grantor passes away. The important component of minimizing a tax burden is to ensure that the assets have been properly titled into the trust. This is the only way to add the additional layer of protection.

Many people default to putting their assets into joint names with a child by assuming this is the most appropriate way to pass on property quickly. However, this can actually increase the taxes that are paid by the child and is not recommended in most cases as an estate planning strategy.

If you need more help determining if trusts are the right tool to help you accomplish estate planning goals, write down your questions and set up a time to speak with a NH trusts lawyer to get more information.