Estate Income Tax
Even after a person passes away, he may continue to receive income. There may be income from a business, or rent, or interest from a bank account or pension. Before the estate is settled, income that continues to come in is considered “income in respect of the decedent”. This income may be considered income of the estate.
Fiduciary Income Tax Return
A Fiduciary Income Tax Return (Form 1041) is used to report income received by the estate from the date of death to the time all assets are distributed. Once new owners of assets receive their inheritance, they could claim the income on their individual tax returns. If the assets go directly to the beneficiary without the asset sitting in the estate for any length of time, income would not be claimed by the estate.
Minimizing Fiduciary Income Tax
If assets are distributed to beneficiaries promptly, there is no need for a fiduciary income tax return because the estate will not hold property long enough for the income to be considered estate income. Property held in a trust or joint tenancy is distributed quickly and without probate and is not subjected to estate tax. Avoiding probate proceedings or other legal issues which can hold up the distribution of property is the best way to minimize fiduciary income tax.
Getting Legal Help
Experienced New York Estate Planning and Trust Attorney Elga Goodman can help you understand your options when deciding how to protect your beneficiaries. Contact us today at 973-841-5111.