There are several different types of tax liability that may exist in the context of an estate. There may be income taxes that the decedent owes, or if the estate is large enough, estate taxes (most estates are small enough that no estate taxes are owed). These taxes should be paid out of the assets of the estate. Absent mismanagement by the executor, these are not personal obligation of the executor. But, it is the executor’s responsibility to make sure these taxes get paid. Also, in many cases, returns must be filed and taxes paid within 9 months of the decedent’s date of death. So it is important for the executor to meet with a tax professional as soon as possible to make sure the necessary returns are prepared in time.
Heirs generally have no tax liability for distributions from the estate, so this is not something the executor should be concerned about taking care of prior to distribution.
Yes, taxes should be paid prior to distribution. Distributions to heirs should be of the net estate. This means the portion of the estate that is left over after taxes, creditors, and administrative expenses have been paid. If tax liability is not determined prior to the distribution then there is no way of knowing if the right amount is being distributed.
Douglas N. Kiger, Attorney at Law
Blado Kiger Bolan, Tacoma, Wash.