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Post-Death Taxes & What Happens to Your Debts After You Die

By: Sarah Halloran • Edited by: Cynthia Bennett • 2 cited sources • Updated Oct 29, 2024

Managing post-death taxes and tax liabilities is more than just a loose end to tie up after somebody dies. These duties are essential to ensure compliance with the law and minimize financial stress during an already difficult time. 

In this article, we explore the process of filing taxes for a deceased person, helping you complete what can be a complex task with confidence and clarity. 

Key Takeaways

• Tax responsibilities when someone dies
• Who files taxes for a deceased person?
• Filing a final tax return for a deceased person
• Paying estate taxes post-death
• Handling inheritance taxes

What Are the Tax Responsibilities After Someone Passes Away?

When a loved one passes away, their tax liabilities don’t die with them. They become the responsibility of the estate’s executor, whether that’s a surviving spouse, family member, friend, or attorney. Those liabilities then transition to a new phase where alternative types of tax become relevant, as follows: 

Income Taxes

Following death, the IRS requires the completion of one final income tax return. This return should include all earnings from January 1 of the tax year until the date of death. 

Estate Taxes

Before distribution to the beneficiaries, the federal government levies estate tax on the estate of the deceased. As of 2024, the federal estate tax exemption threshold is $13,610,000^[1]. 

Inheritance Taxes

Inheritance tax is also applicable in some states. Where the estate covers estate tax before the distribution of assets, beneficiaries are required to pay inheritance taxes. 

Death and taxes aren’t easy topics to broach, but both are inevitable. Ensure there is enough liquidity in the estate to cover debt and taxes, especially if there’s a joint estate or you want your heirs to inherit.

Sandy Kenrick, Personal Finance Writer

Who Files Taxes for a Deceased Person? 

Filing taxes for a deceased person is often the responsibility of the executor or administrator. Here’s a step-by-step guide to the process. 

The Role of the Executor or Administrator

Usually, the deceased person appoints somebody they trust to handle their estate affairs through their will. This person is known as the executor. If there’s no will or appointed executor, the court appoints an administrator. Their responsibilities include: 

• Gathering assets: Identifying and securing assets 
• Paying debts and taxes: Settling outstanding debts and taxes with assets 
• Filing the tax return: Filing the final personal tax return for the deceased 
• Distributing the estate: After settling taxes, distributing the remaining assets according to the will or state law 

How Do You Find Out Who the Appointed Executor or Administrator Is?

The deceased’s will usually names the executor. If somebody files the will with the probate court, it becomes a public record. You can contact the court in the county where the deceased lived to obtain details. 

How Do I File a Final Tax Return for a Deceased Person?

Like all tasks that involve taxes, preparation and understanding are important. Here’s a step-by-step guide to the process: 

Organize the following documents:

• Death certificate: Proves the date of death
• Social Security number: Required for tax forms
• Last filed tax return: Provides a reference for past income, deductions, and credits
• Documentation of assets and debts: Bank statements, investment records, and statements of outstanding debts 
• W-2s or 1099s: For any income earned in the year of death 

File the tax return as follows: 

• Form 1040: Complete standard Form 1040 for the deceased. This needs to cover from January 1 through the date of death. 
• Mark “DECEASED” on the return: Mark the top of the tax return with “DECEASED,” the deceased’s name, and the date of their death. 
• Sign the return: The executor or administrator must sign the return, stating their name and role. 

Who Gets the Tax Refund for a Deceased Person?

Any tax refunds that are due are usually paid to the estate and distributed to beneficiaries according to the will or state law. 

How Long Does It Take to Get a Tax Refund for a Deceased Person? 

The IRS typically issues tax refunds within 21 days for electronically filed returns as long as there are no errors or audits. Refunds on returns filed by mail may take longer. 

What happens if you don’t file taxes for a deceased person with no estate?

If a person passes away and leaves no estate, you may not need to file a return for them. It’s best to consult a professional before making any assumptions, however.  

Paying Estate Taxes on Property Post-Death

Estate taxes, also known as death taxes, are levied on the estate of a deceased person. Here’s a brief guide to handling these taxes:

You’ll need to determine tax liability, as follows: 

• Value the estate: Calculate the value of all assets, deducting any outstanding debts. 
• Apply exemptions: Federal and state exemptions determine if taxes are due. Estate taxes apply if the estate’s net value exceeds this figure. Exemptions may vary from state to state. 

You’ll need to file an estate tax return, as follows: 

• Federal return (Form 706): This form must be filed within 9 months of death if the estate exceeds the federal exemption ($13,610,000 as of 2024)
• State returns: This needs to be filed in states with estate taxes. Deadlines and exemption thresholds vary. 

Pay any outstanding taxes as follows: 

• Taxpayers must pay taxes by the return filing deadline, usually by check or electronic transfer. 

Handling Inheritance Taxes and Its Impact on Beneficiaries

So, what is inheritance tax, and how does it differ from estate tax? Currently, only six states impose inheritance taxes: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Inheritance taxes are different from estate taxes in that beneficiaries pay them directly when they receive assets from the deceased’s estate. 

Filing and Paying Inheritance Taxes

The filing and paying of inheritance tax varies from state to state. These taxes are typically due within a certain period after the deceased’s death, generally within 9 months to 1 year^[2].

Can the IRS Take Your Inheritance If You Owe Back Taxes?

Yes, if you have outstanding federal tax debts, the IRS has the authority to take back inherited assets to pay your tax liabilities. 

Additional Post-Death Tax Considerations

Factors such as outstanding debts or jointly owned assets can delay the estate planning and management process. For example, assets can’t be distributed to beneficiaries until any outstanding debts are settled. 

The Importance of Seeking Professional Help With Post-Death Taxes

If you’re feeling overwhelmed with handling post-death tax responsibilities, seeking professional help can ease the process. From managing multiple assets to understanding state-specific inheritance laws, professionals help minimize the burden and improve outcomes. 

Handling the Post-Death Tax Process With Confidence

The death of a loved one is a difficult and emotional time. To ensure a smooth post-tax process, it’s important to approach the task with the right knowledge and patience. From determining tax liability to the timely payment of outstanding taxes, the more you know, the easier the process can be.