A guide to paying estate taxes in South Carolina
South Carolina families that have just lost a loved one have much on their plate. One element many fail to consider are taxes and how they will get paid.
What taxes occur after the death of a loved one
The Internal Revenue Service (IRS) still needs the decedent’s personal income tax return. These are typically due on April 15 of every year, but some taxes are immediately owed.
Estates can still earn income while they’re in the probate process. During this time, they’re not yet passed to the beneficiary. Instead, the executor of the estate plan handles everything. Generally, they’re handling:
- Personal income taxes for the decadent
- Taxes on income earned by the estate
- Taxes on property in the estate
How to handle estate taxes
Estate taxes vary depending on the size of the decedent’s estate. Larger estates will take longer to “settle,” or pass off to beneficiaries. Sometimes, you can file an extension using Form 706.
Every year the estate earns income, the executor must file an IRS Form 1041. This will be until you settle the estate. For every federal form you file, a related state form must also be filed for state taxes.
How estate taxes are paid
Generally, the estate taxes (and any other taxes) must be handled with money from the estate. There may be estate planning tools that the decedent set up to cover the estate taxes, such as a trust or life insurance policy.
It’s rare, but sometimes there is not enough money in the estate to cover all the taxes. In that case, it will be the responsibility of the surviving family members to pay the remaining taxes.