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Death and Divorce Taxes

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Death and Divorce Taxes 

Death Taxes

One of your most important duties as executor or administrator of a deceased person’s estate is to look after the tax affairs of the decedent. This involves filling out the various forms and tax returns listed below:
  • The Decedent’s Final Income Tax Return
  • Fiduciary Income Tax Returns
  • Stepped-Up Basis for Inherited Property
  • Federal Gift & Estate Tax Returns
  • State Tax Returns

The opportunities for tax planning often outlive the decedent. Postmortem tax and estate planning are critical to ensuring that the decedent?s last wishes are carried out at a minimum tax cost. This planning is usually aimed at either minimizing the estate?s or the beneficiaries? overall tax liability or helping to facilitate the payment of taxes. This requires knowledge of the many elections and planning alternatives that are available.

Are there income or estate tax elections that could be beneficial in the circumstances? If so, how can they be claimed? When and how should you fund bequests? Should disclaimers be used? Should you elect to have qualified terminable interest property qualify for the marital deduction? Should any elections be made to maximize the decedent?s generation-skipping transfer tax exemption? How do pending changes in existing law affect the tax picture? Unless you can answer these questions, you will need counsel on these issues.

An experienced tax accountant/CPA or tax attorney should review the estate plan to determine if there are opportunities for adjustment based on circumstances that were not considered during the decedent?s life, or to adjust for changes in facts.

Divorce Taxes

Divorce is often a time of financial strain and confusion. Despite your circumstances, the government will still expect that you file your taxes promptly and correctly. You will need to be prepared to make decisions about tax money you owed before, during or after your divorce.

It is strongly recommended that before any settlement agreement is finalized, that the parties consult with an experienced tax accountant / CPA to review the tax consequences of the agreement and do your tax planning for the first year after your divorce. This will ensure that you receive all deductions for which you qualify.

Take the time to understand the numbers and how it applies to your unique situation before you sign your divorce settlement. Secure your future; getting a financially smart divorce also includes properly wrapping up the loose ends (changing your accounts /will/beneficiaries etc.) once the divorce is over.