Depending on how involved you’ll be with settling the estate, you may want to find a tax accountant to help you coordinate your efforts with your attorney.
For the year in which the death occurs, the deceased person’s income taxes will be due on the normal filing date of the next year. Of course, you can easily request a 6-month extension, which will be granted automatically. If you’re the husband or wife of the deceased, you can still file a joint return for the year of death. If you have dependent children, you can file a joint return for up to two years after the death of your spouse.
According to Internal Revenue Service (IRS) regulations, you may need to file a federal estate tax return (Form 706 from the IRS) within nine months of the death. Currently*, estate taxes are due only on estates valued at $5,250,000 or more. Special deductions are available for spouses. Your attorney or a tax accountant can guide you in preparing tax forms and give you valuable information on your state's estate tax, inheritance or gift tax, and fiduciary income tax, if applicable.
The following is meant mainly for spouses, but it can also apply to anyone whose financial resources were supplemented by the deceased.
Once you’ve applied for benefits and have some idea of your financial position, you can start planning for the future. First, review your cash flow. Take a look at how much money is coming in each month and how much money is flowing out to meet expenses. From this, you can put together a short-term budget. If your monthly expenses are greater than your income, look for ways to cut spending or for possibilities to boost your income. If your monthly income exceeds your expenses, you can consider additional savings or investments for your future.
Of course, this is a very basic approach to taking stock of your finances. There’s no formula that will yield a perfect plan for everyone. The idea is to face your finances, realizing that expenses go on and must be met.
* For previous years, the applicable exclusion amount was $1,500,000 (2004-2005), $2,000,000 (2006-2008), $3,500,000 (2009), $5,000,000 (2010-2011), and $5,120,000 (2012).
The tax information contained herein is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding tax penalties that may be imposed on the taxpayer. TIAA-CREF or its affiliates do not provide tax or legal advice. Taxpayers should seek advice based on their own particular circumstances from an independent tax or legal advisor.
The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons.
TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., distribute securities products.
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