Probate administration has multiple steps, and following each one is of the utmost importance. Especially when it comes to taxes and debts, an executor could wind up financially responsible for any major oversights or mistakes they make.
Initiating probate proceedings with the Texas courts is very important. So is publishing notification of the death and advising creditors about the impending administration of the estate. The executor has certain potential liabilities related to the responsibilities of the deceased party.
They must handle repaying the testator’s debts before distributing assets to family members and other heirs. They also have an obligation to handle tax responsibilities on behalf of the deceased. What kinds of taxes might apply to an estate probated in Texas?
The state does not assess inheritance or estate taxes
Some state governments apply a tax to the estate itself or to the inheritance received by certain people. Texas does not assess either of these taxes. However, if the estate is worth more than $11.7 million, federal estate taxes may apply. An executor should verify the value of estate assets and any tax liabilities before they begin distributing assets to the beneficiaries of the estate.
The executor must file a final tax return for the deceased individual
Your tax obligations don’t just disappear when you die. Any income you earned prior to your death is still subject to taxation. Executors will have to file a final tax return on behalf of the deceased both to satisfy any remaining income tax obligations and to notify the Internal Revenue Service about the death of the taxpayer.
The estate itself may be subject to income taxation
An estate is a legal entity with some of the same responsibilities as individual people. Therefore, certain tax responsibilities can also fall directly to an estate. If an executor has to sell or liquidate assets on behalf of the estate, there could be taxes due on any revenue earned. If the sale of estate assets returns more than $600 in income, the executive may need to file a tax return for the estate itself.
Learning more about executive responsibilities and the taxes that apply to estate assets can help as you navigate the Texas probate process.