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Who handles an estate’s tax liabilities?

| Aug 12, 2019 | Inheritance Disputes |

One of the potentially more contentious issues involved with the administration of an estate in Seattle is the potential for having to pay estate taxes. You (and other beneficiaries) may understand that if taxes are owed, they should be paid from the estate’s assets. Yet how are you to know if taxes are owed and how they might affect yours (and others’) interests in the estate? 

The federal government has set an estate tax threshold to determine which estates will be required to pay taxes (most states defer to federal tax laws when it comes to taxing estates; Washington, does not have an state estate tax). Per Forbes Magazine, the federal estate tax threshold for 2019 is $11.4 million. What this means is that any estate whose total taxable value is below that amount will not be taxed. 

Another benefit of the estate tax threshold is that it allows couples to combine the unused portions of their threshold amounts (which would technically allow them to protect up to $22.8 million from being taxed). Say that your spouse dies. Thanks to the unlimited marital deduction, they are allowed to leave you up to the estate tax threshold without that amount being subject to tax. 

Confusion often exists, however, about the availability of this benefit. If you are not the surviving spouse of the decedent, then you will want to ensure that whoever is understands that their responsibilities in this regard in order to avoid contention being thrown their way by other beneficiaries. They must file an estate tax return the same tax year their spouse dies electing estate tax portability. If they do not (and the amount gifted to them by their spouse pushes the value of their estate over the threshold), their estate would be taxed when it might otherwise would not have.