Estate Taxes in Minnesota Probate and Estate Administration
One of the most important responsibilities of a personal representative or executor in a Minnesota probate administration is to oversee the preparation and filing of the deceased person’s final income tax returns(s), any state or federal gift tax returns, and any estate and/or gift tax returns for the estate.
MN Probate Taxes and Estate Administration
If the personal representative does not pay taxes, or fails to file returns on a timely basis, he or she may be held personally liable for any penalties or interest imposed on the estate. See U.S. v. Boyle, 469 U.S. 241 (1985).
The personal representative must act prudently in all matters. After all, the personal representative is a fiduciary for the estate. He or she must use their best judgment in making key decisions required in the course of discharging the decedent’s and the estate’s tax obligations.
For example, there are certain tax elections, valuations, asset allocation decisions, and the interpretation of various legal instruments may factor some beneficiaries’ interest over others. IF these decisions are made imprudently or without regard to the personal representative’s fiduciary duties, he or she may be personally liable to the beneficiaries who were adversely affected by the personal representative’s choices.
Furthermore, if he or she fails to pay all of the deceased person’s tax obligations before paying other debts with other lesser priority – or if he or she distributes assets to the decedent’s beneficiaries, he or she may personally liable for the unpaid tax obligations.
What tax documents need to be filed in a Minnesota probate and estate administration?
A personal representative should start by filing IRS Form 56 (Notice Concerning Fiduciary Relationship) to notify the IRS of the personal representative’s serving as fiduciary for the estate. If Form 56 is not filed, a Notice of Tax Liability sent to the deceased person’s last-known address will satisfy any applicable notice requirements. Of course, this is particularly important if it is believed that the deceased person did not file their income taxes in any prior years.
The personal representative will also be responsible for filing the deceased person’s personal income tax return(s). The deceased person’s final return will include all activity up to and including the date of death. The final return is due on April 15, 2014 of the year following death. Also, the personal representative must file past-due taxes returns from any prior years.
Finally, if the deceased person’s estate qualifies, the personal representative will have to file an estate gift tax returns and, possibly, a Minnesota estate tax return if the assets are worth over $1,200,000.00 in the tax year 2014. (As an aside, the Minnesota and federal estate taxes levels change and a Minnesota probate attorney should be consulted for further, current, information on this issue.
MN Probate Lawyers and Attorneys
Joseph M. Flanders is an experienced attorney. He routinely handles Minnesota estates administration and serves as a Dakota County Minnesota probate attorney. For further information or advice on your particular Minnesota probate case, contact the law firm at 612-424-0398.
