When do estate taxes come into play during probate

Estate

When do estate taxes come into play during probate
  1. Federal Estate Taxes:

    • The federal estate tax applies to estates with a value exceeding the federal exemption limit, which for 2024 is $12.92 million per individual.
    • Suppose the estate's value is above this exemption. In that case, the executor must file IRS Form 706 (United States Estate (and Generation-Skipping Transfer) Tax Return) within nine months of the decedent's death, although a six-month extension is available.
    • The federal estate tax return will calculate the tax owed, and the executor is responsible for paying this tax from the estate's assets.
  2. State Estate Taxes:

    • Several states impose their estate taxes with exemption limits often lower than the federal exemption.
    • The thresholds, rates, and filing requirements for state estate taxes vary by state.
    • The executor must file the appropriate state estate tax return and pay any taxes due according to the state’s deadlines, which are often similar to the federal timeline but can vary.
  3. Payment of Estate Taxes:

    • Estate taxes are typically paid out of the estate's assets before any distributions to beneficiaries.
    • The executor must ensure all estate taxes are paid to avoid personal liability and to comply with probate court requirements.
  4. Probate Process:

    • During probate, the executor or personal representative is responsible for identifying and valuing the estate’s assets, paying any debts and taxes, and distributing the remaining assets to the beneficiaries.
    • Estate taxes must be calculated and paid as part of settling the estate's liabilities.
    • The probate court may require proof that estate taxes have been paid before approving the final distribution of the estate.

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