Who pays the taxes on your estate?
As you do your estate planning, you realize that you probably cannot plan everything out so that your heirs don’t have to take care of any details. If you were to pass away unexpectedly, for instance, someone would still have to pay the property taxes and your income tax at the end of the year. You’re also going to have different monthly bills that have to be taken care of. Even if you’re current on them right now, you’ll probably still have one final payment that needs to be made.
So who handles these debts and taxes? What do you need to do in your estate plan to make sure that someone can take care of this without it being a hardship for your heirs?
Choosing your estate executor
This is one reason why it’s important to think carefully about who you choose as the estate executor. This administrator will be the one who has to pay off any bills or taxes that remain.
To plan for this, remember that it is actually your estate that has to pay the taxes. The executor doesn’t have to pay them out of their personal funds, regardless of how wealthy they are. They use the money that you leave them to do so, and they distribute what’s left.
For this reason, people will sometimes create a special fund that is intended to be used by the executor to pay off any final bills. But even if you don’t do this, just know that the person you choose to be the estate executor is the one who will make these final financial decisions.
As you set everything up, take the time to carefully look into all of your legal options.