Who is Responsible for Paying the Estate Taxes?

Owned by experienced tax specialist Casey Earnest, Sunbelt Tax Services is a tax preparation firm based in Jackson, Mississippi. Sunbelt Tax Services is manned by expert tax preparers who are well-versed in business and personal tax returns.

One example of a personal tax is the estate tax. The estate tax is imposed on a deceased person’s assets valued at the time of his or her death. It becomes due for payment nine months after the death of the person.

Normally, the deceased person’s will specifies who will pay for the estate tax, which generally falls under the responsibility of the executor. In this case, the executor uses the probate assets to pay off the estate tax.

However, a problem arises when some of the assets pass out of the will, such as in the case of joint ownership or beneficiary designations. When any of these cases arise, the probate assets may not be enough to pay off the estate tax, which means that some beneficiaries will end up paying a disproportionate share of the estate tax.

Additionally, some non-probate assets, like IRA’s, 401K’s, and life insurance policies, are directly paid to the beneficiaries. Since these assets are non-probate, the beneficiaries need not contribute to the payment of estate tax although such assets are included in the total taxable assets and are included in the computation of the estate tax.

A person should be very diligent in naming the beneficiaries of his or her assets in the will to avoid future problems among the beneficiaries when it comes to paying the estate tax. A comprehensive discussion with the attorney may be necessary for the preparation of the will.