Debts and Taxes in DC Probate

Before the assets in an estate can be distributed to beneficiaries, any outstanding debts and taxes in DC probate must be paid. A well-versed probate lawyer can better help you understand these obligations in the probate process.

Satisfying Debts in Probate

A decedent’s debt will have a strong influence on the administration of the assets of their estate because it will affect how much is distributed to the beneficiaries. Debts will be paid prior to any distribution, so even though a person may have a will and leave everything to their children, if their debts are greater than their assets the beneficiaries would not inherit any money.

If a decedent owes a considerable sum of money there are several ways the personal representative can satisfy the debt, depending on the type of debt. For example, if the decedent owed taxes, that would be considered a valid enforceable debt and the taxes would be paid from estate assets prior to any distributions being made to the beneficiaries. The personal representative should make sure that all the decedent’s tax returns have been filed and consult with a tax advisor or accountant to determine whether a fiduciary income tax return must be filed. A fiduciary income tax return reports income generated by the estate after the decedent’s date of death. Once the representative determines the appropriate tax returns have been filed, they must ensure that any taxes that are due are paid.

Handling Taxes in DC

If a person’s estate has generated income after their death, a fiduciary income tax return may need to be filed on behalf of the estate. If the estate did not generate income after a person died, a fiduciary tax return may still need to be filed, but it would be best to consult with a tax advisor before making that determination.

A personal representative will also need a tax identification number to open a bank account in the name of the estate. An estate bank account which is generally the best place to collect all of the estate assets so they can remain in one place. Alternatively, if the representative is going to transfer existing accounts in the decedent’s full name to an estate account, the bank would require a separate tax identification number in order to create the account.

Once a personal representative has been appointed by the court and receives letters of administration from the court, they will have the authority to obtain a new tax identification number for the decedent’s estate from the Internal Revenue Service. If the representative has an attorney, the attorney would be in a good position to obtain that tax ID for the estate, or the personal representative could apply and get the tax ID themselves. They can do this either online or by submitting a form in the mail that will request certain information about the estate, such as the name of the decedent, the decedent’s Social Security number, the decedent’s date of death, and information about the personal representative. The IRS Form SS-4 will provide all of the information that the IRS needs in order to allow a person’s attorney or any other third party to obtain the tax identification number.

An Attorney Can Discuss Debts and Taxes in DC Probate

To better understand the role played by debts and taxes in DC probate, it may be beneficial to speak with a knowledgeable attorney. Call today for a free consultation to better understand the process.