Estate Planning Common Questions |
How will estate taxes be paid if I leave no provision in my will?
Answer:
The IRS places an automatic lien against your estate for any estate taxes that may be due. If your will leaves no specific provision about how these taxes are to be paid, state law generally controls how the burden of paying the taxes will be distributed among your beneficiaries. As a result, your beneficiaries may end up paying taxes out of their own pockets or selling some of the property that you left to them to meet this obligation.
Most state apportionment statutes impose the tax payment liability only on those assets that contributed to the tax imposed. Thus, your spouse will not be responsible for any taxes if he or she received all your property free of tax under the unlimited marital deduction. Likewise, charities that received property free of tax under the charitable deduction will not have to carry any of the tax burden.
In addition, most state apportionment acts divide up the tax burden on a prorated basis. For example, if your taxable estate was evenly split between two beneficiaries, each beneficiary would be responsible for 50 percent (one-half) of the taxes due. Beneficiaries who received the taxable portion of your estate must pay their share of the taxes owed when they are due – generally nine months from the date of your death. They may have to sell their inheritances to get the cash. If their inheritances are already spent, however, they still must pay the taxes, and the IRS can go after any of their other assets to satisfy the lien.
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Estate and Gift Tax Questions
- How can I minimize taxes on my estate?
- How will estate taxes be paid if I leave no provision in my will?
- How can I determine what my business is worth for estate and gift tax purposes?
- I just made a gift. Do I have to file a gift tax return?
- What is the applicable exclusion amount?
- I intend to make tuition payments directly to my grandchild's college, and I know this will reduce my estate. But would it be better to contribute to a 529 plan instead?
- The death benefit from insurance on my life will be paid to an irrevocable life insurance trust (ILIT). What if those funds are needed to pay my estate taxes?
- Will the value of my 529 account be included in my estate or my beneficiary's estate?
