If you’re serving as the personal representative of an estate for the first time, it's natural to feel overwhelmed. The job comes with many responsibilities, including gathering all assets, paying off remaining debts, liquidating property as needed, and distributing assets to beneficiaries. It also requires filing tax returns, which can be a complicated process. Fortunately, a probate attorney can help you navigate the following tax-related tasks.

What Tax Obligations Must You Meet as a Personal Representative?

1. Personal Income

In most cases, you’ll be required to file a final federal and state income tax return for the decedent. You may also need to file a tax return for the previous year if they died before filing it themselves, as well as any recent years that the decedent did not file. If any taxes are owed, they must be paid by the estate; if there are refunds, they’ll be added to the probate assets.

2. Estate Income

If the estate makes more than $600 in annual gross income, you’ll also need to file an estate income tax return. The process resembles filing a personal tax return with similar credits and deductions allowed. The most significant difference is that a decedent’s estate can receive deductions for distributions made to beneficiaries. 

While bank accounts, non-IRA CDs, cars, and life insurance are not taxed as income, assets that have never been taxed before, such as IRAs, 401(k)s, and savings bonds, will be. A probate attorney can help you determine which assets need to be reported.

3. Inheritance

While Nebraska does not have an estate tax, it does levy an inheritance tax on the money passed from an estate to the deceased’s heirs. It’s helpful to have a probate attorney’s help when filing this return, as the rate varies depending on the beneficiary’s relationship to the deceased.

For example, parents, grandparents, siblings, and children must pay 1% on any value over $40,000, while uncles, aunts, nieces, and nephews are required to pay 13% on assets over $15,000. All other heirs must pay 18% on amounts over $10,000.

If you’ve been named the personal representative of a will, let David R Webb, Attorney at Law help you handle this complicated process. For more than three decades, this seasoned probate attorney has been serving individuals throughout the Lincoln, NE, area. In addition to estate planning, wills, and probate law, he also assists with tax matters related to the deceased's estate. Visit his firm’s website to learn more about his capabilities. Call (402) 477-7577 to schedule a consultation today.