An estate may be subject to filing a federal tax return for any income that the estate earns after the death of the decedent until the estate is closed and may be subject to paying a one- time federal and New York estate tax based upon the value of the total assets of the estate at the time of the decedent’s death. The executor or personal representative must file the appropriate tax returns and pay any estate taxes due out of the estate assets within 9 months after the death of the decedent. The beneficiaries of the estate are subject to paying the federal income taxes on any income the estate earns based upon their share of distributions received.
Federal and New York State Estate Tax Returns
For a decedent that passes away in 2011 or 2012, a federal estate tax return (Form 706) must be filed with the IRS by the executor or personal representative of a New York Probate Estate and estate taxes are due if the gross estate after deductions and exemptions of the decedent exceeds $5,000,000. Form ET-706, New York State Estate Tax Return, must be with the New York State Department of Taxation and Finance, whether or not the estate owes federal taxes, if the decedent was a New York resident and/or U.S. citizen and the estate assets exceed $1 million after deductions and any exemptions. If Form 706 was filed, a copy must be attached to the ET-706. If the decedent owned real or tangible property in the state, but was not a resident, the return must be filed if the gross estate exceeds $60,000. It may be possible to file for an extension for all tax returns. Once the New York State estate return has been processed, the New York State Department of Taxation and Finance may issue a closing letter reflecting that no tax is due. It may take approximately 4-6 months to receive this letter.
Form 1041 Estate Federal income Tax Return
A Form 1041 and Schedule K-1 must be filed by the estate with the IRS regarding any income received by the estate in excess of $600 from the time of the decedent’s death until the estate is wound up and closed. The 1041 is similar to Form 1040. The estate may also deduct administrative expenses, including executor or personal representative fees, legal fees, distributions to the beneficiaries and any charitable donations. The estate does not pay the taxes on the income because it is passed through to the beneficiaries, who are are responsible for paying the taxes on the income they receive from the estate.
Since New York probate estate and federal income taxes are highly complex matters, it is recommended that the executor or personal representative consult with a New York Probate Attorney regarding estate taxes and filing requirements and procedures.
If you wish to speak to a New York estate attorney, call the Law Offices of Albert Goodwin at (212) 233-1233.