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Executor Instructions At Death

Posted by Admin Posted on Jan 15 2016
  1. Notify social security administration (give them the social security number of the deceased and the date of death) and pensions of the death immediately.

  2. Meet with the CPA and decide whether to use a calendar year or fiscal year for the estate income tax return (Form 1041).  If you elect to use a fiscal year you will file an estate income tax return.  If you have a trust and elect to use a calendar year you will file a trust income tax return.  A calendar year return is due April 15 of the following year (unless extended).  A fiscal year return is due 3 ½ months after the fiscal year-end (unless extended).  A fiscal year can suspend estimated tax payments for the first two years and defer income.

  3. Consider prepaying state tax in year of death if AMT (alternative minimum tax) will apply in the next year.  Make sure estate pays its share of the state income tax.

  4. Consider reducing estimated tax payments in following year if some of the income will be taxed by the estate or if income will fall (do a tax estimate for the survivor for the next year).

  5. Meet with the attorney and decide if any legal notices need to be filed.  Decide if any estate assets are subject to probate.  For probate assets file informal probate papers with court and secure letters testamentary.

  6. Obtain a tax identification number from the IRS for the estate or trust.  Use this number in all future transactions until the estate or trust is distributed to the beneficiaries. Give this number to banks, mutual funds, and others immediately as the tax id# for the trust.

  7. Set up new bank and other accounts for the estate or trust using the new tax id# for the trust.  Close all old accounts immediately with the deceased social security number listed on them (even if in the trust name).  Keep a careful record of all deposits, withdrawals, and checks written.

  8. Value all assets in the estate.  Get appraisals for all real estate as of the date of death.  Get a detailed listing of highs and lows for each bond, stock, and mutual fund on the date of death.  Notify your broker to change the cost basis in their records.  Obtain an estate tax information organizer from the CPA.

  9. Meet with the CPA and decide if an estate tax return (Form 706) needs to be filed.  This return is due nine months after the date of death.  If your spouse was the first to die and you are the surviving spouse you may want to file Form 706 to preserve the unused spousal estate & gift tax exemption.  Please contact me about this.

  10. Inform all beneficiaries to not file their income tax returns for the next year until they receive a K-1 from you for their share of the estate’s income and expenses.

  11. Keep enough money in the estate bank account to cover expenses and taxes.  File a final income tax return (Form 1040) for the decedent (the person who died).  This return is due by April 15 of the following year (unless extended).

  12. I recommend that you not distribute the assets until all liabilities (bills) have been paid.  If you distribute noncash assets (investments, real estate, etc.) give an equal share to each beneficiary or make all noncash distributions at the same time.

  13. If there is a surviving spouse consider accelerating income on Form 1040 in the year of death to use up carryovers (capital losses, charitable contributions, net operating losses, etc.).  Most unused carryovers expire in the year of death.