My wife is an only child and her mother and father has past away.
She is the executer of the estate. Their is checks to be cashed and money market accounts. She was told to move them(from the lawyer).An create an estate account .To pay for stuff that goes along with running the estate.
My question is will she end up paying taxes on the money left over in the accounts.Because of the IRS having their nose in it.
She is to inherit everything in the end.
Chapter 7 Bankruptcy Attorney
The estate must have a tax number because the social security number for your Wife's parents is no longer good. The estate is considered a separate entity, like a corporation or a Trust.
Federal estate taxes are paid by the estate, not by the people who are heirs to the estate. If your inlaws have a huge estate, there will be estate taxes owed to the IRS by the estate.
The taxes a state may charge can apply to both your Wife or to the estate. Frankly, by worrying about the IRS you are avoiding the more important issue of money that you may owe to the state taxing officials.
Hope this perspective helps!
Estate Planning Attorney
Just to clarify the previous poster's answer: There may or may not be a number of taxes due for the estate 1.)State inheritance tax, 2.) state estate tax, 3.) federal estate tax. Also, and the reason your need an estate tax id number (EIN) is for estate income. Assuming no real trusts are involved, if the assets of the estate (from death of decedent to distribution to heirs/beneficiaries) are in an account or investments those accounts earn ESTATE INCOME. The ESTATE is required to file in many situations an Estate Income Tax Return (Form 1041). This is like a personal income tax return but for the decedent's estate. If this is a small estate there may not be enough estate income generated for there to be tax due, but it is a consideration. It is normal practice for the bank to open an Estate checking account with a unique tax ID number. The tax that is possible is on the income made by the estate assets, not the amount of money in the estate.
This is not legal advice nor intended to create an attorney-client relationship.
2 lawyers agree
This is basic to and required for estate administration. When a person dies only the executor can act for the estate. The executor is required to transfer all assets into the estate. The estate needs an EIN to establish bank accounts, investment accounts and to report its income and expenses to the IRS. Income, expenses and distributions of income during the course of the estate administration must be reported to the IRS via Form 1041 and the corresponding state fiduciary return. To do all this the estate needs an EIN.
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Your summary does not say anything about the size of the estate. The practical problem that you have is that the *estate* cannot use the social security number of the decedents, any longer. The financial institutions are required to associate those assets with a tax identification number, and so you need to apply for that number by filing an SS4 form with the IRS. Whether or not the estate needs to file a tax return depends on the assets and the income the assets generate. In the event that there is no income, then the best practice is to file a Form 1041 that indicates it is the final return and show a $0 balance. You would also need to file a final Form 1040 for the decedent(s), to deal with any income that accrued prior to opening the estate(s).
If this is a Michigan estate, there is no inheritance tax. Depending on the date of death and the size of the estate, there would likely be no federal or state estate taxes, either.