There are two applicable District of Columbia tax systems reviewed at the death of an individual. First, the District of Columbia estate tax, which is a tax on the right to leave property to individuals. Second, District of Columbia income tax may be assessed for any income received prior to and after death.
It may be prudent to speak with a DC probate lawyer soon after the loss of a loved one to determine the inheritance, estate, or income tax exposure for the estate may be, assist with valuing the assets of the estate, and outline a timeline for the cash needs for the estate to pay any taxes that may be due.
Local Taxes Due When a Person Dies
The District of Columbia has two taxing systems that are applicable to estates assets. In addition to DC taxing systems, there are also federal tax systems.
The first tax system is the DC Estate Tax. Estate tax is a tax on the right to leave property at your death. The DC estate tax filing threshold or exemption for decedents dying in the 2016 tax year is $1 Million. This tax filing exemption is slated to rise to $2 Million, but the increase is not anticipated until 2017. The tax has a maximum rate of 16%, and for some estates, both DC and federal estate taxes may be assessed.
The second type of taxing system in DC is income tax. Income generated from January 1st of the year of death to the date of death is reported on the decedent’s final income tax return. Any income paid after the date of death is reported on a fiduciary income tax return.
There are numerous post-mortem elections that can be made during this period to possibly minimize the exposure to taxes, to preserve the estate tax exemption and unused estate tax exemption of the first spouse to die, and to possibly minimize the income tax burden for the beneficiaries. It may be helpful to contact a local DC attorney to assist you with navigating all of the tax systems, and to advise you regarding the deadlines to file the necessary tax returns. These systems can be complex and are specific, and experienced help can be very beneficial.
Benefits of Contacting a Probate Lawyer
An attorney can assist with valuing all of the assets as of the date of death of the decedent to determine whether DC estate taxes are due. An attorney can also help to determine whether inheritance taxes are due, and to prepare a DC and/or federal estate return.
The benefits of contacting a probate attorney are to help an individual understand what taxes an estate may be subject to, and to understand the deadlines and the responsibilities that a personal representative has to file any returns or to pay any taxes.
A person’s probate attorney in DC may be able to also assist in minimizing or advising regarding post-mortem estate planning to minimize exposure to estate taxes, or at least maximize the use of the estate tax exemption at the death of the first spouse.