Home > Tax News & Info > Death & Taxes: What to do When a Loved One Dies

Death & Taxes: What to do When a Loved One Dies

Continuing with our estate tax theme for October we come to the topic of what to do in the sad event of a spouse or family member's death.  Aside from planning memorial services, there are some tasks that are less commonly thought of.  Below is a list of some things that need to be considered to make this traumatic event less stressful.

  1. Death Certificates – these typically are obtained from the funeral home. Get multiple copies; you'll need them for financial institutions, government agencies, and insurers.
  2. Legal – locate the will and any other legal documents, such as a trust.  Contact an attorney and CPA for next steps on both validating the will and transferring the assets to the heirs.   This will be the first steps to obtain the legal documents to work on behalf of the deceased.
  3. If they were working, contact the person's employer.  Request information about any pay due to the deceased, any retirement funds and if there are any benefits due, such as life insurance.
  4. Banking and Credit Cards – Reach out to their bank to find any accounts and/or a safe deposit box.
  1. Life Insurance – Contact the life insurance agent to begin the claims process.
  2. Postal Service – Provide change of address information for mail forwarding.
  3. Government Benefits – Contact Social Security at 800-772-1213, socialsecurity.gov – and/or any other agencies from which the deceased received benefits, such as Veterans Affairs at 800-827-1000; va.gov – to stop payments and ask about applicable survivor benefits.
  4. Pension – Connect with any other agencies providing pension services to stop monthly checks and get claim forms.
  5. Investment Advisors – Contact the person's investment adviser for information on holdings.

Since we are a CPA firm we will go into more detail regarding taxes.  Below is a list of forms the IRS may require in the event of someone's death.

Prior year income tax return – IRS Form 1040 & Minnesota Form M1

  1. Required if decedent passes before filing taxes for the prior year.
  2. Prior year return is due April 15th of year of death.

Year of death income tax return – IRS Form 1040 & Minnesota Form M1

  1. Due April 15th of the following year.
  2. This will report income from 1/1 to date of death.

Fiduciary income tax return – IRS Form 1041

  1. Required if the estate had income greater than $600.
  2. This return reports the income earned from date of death to end of either fiscal year or 12/31.
  3. Due the 15th day of the fourth month following close of tax year

Estate tax return – IRS Form 706 and Minnesota Form M706

  1. IRS Form 706

-Required if the gross (total) estate of the decedent is worth more than the IRS's applicable exclusion amount  ($5,340,000 for 2014).

-Taxable lifetime gifts must be added to the gross estate for applicable exclusion amount calculations.

-Due nine months after date of death.

  1. Minnesota Form M706

-Required if federal gross estate plus federal taxable gifts made within three years of decedent's death exceed $1.2 million.

-Due nine months after date of death.

Gift tax return – IRS Form 709

  1. Required if decedent made a taxable gift in year of death.
  2. Due earlier of April 15th of the year following gift, or due date of Form 706.
  3. There is currently no gift tax for the state of Minnesota.

Every situation does not necessarily create a filing requirement for each of the above forms.  Please consult your tax advisor should you have any questions regarding your specific situation.

Comments ( 0 )
  1. No comments yet.
Comments are currently closed.
Trackbacks & Pingbacks ( 0 )
  1. No trackbacks yet.
  2. Trackbacks are currently closed.