If you are serving as executor or trustee for a loved one’s estate/trust, you have duties, including filing and paying taxes.  This is serious stuff, because if you goof up, you can be held personally liable for the taxes, interest, and penalties.

We are providing an overview of executor and trustee tax duties, but you definitely need to meet with a qualified probate – trust settlement attorney to get good advice, regarding your individual situation.

The 1040

As executor or trustee, you will be responsible for filing the decedent’s final 1040.  If your loved one died anytime in 2011, the final tax return will be for the tax year ending December 31, 2011.  If you loved one dies anytime in 2012, the final tax return will be for the tax year ending December 31, 2012.

As you might expect, the returns are due April 15^th of the year following death and you use the decedent’s social security number.

The 1041

If the trust or estate has any income from that date of death until the trust or estate is closed, a 1041 must be filed.

The 1041 is due April 15^th of the year following death and you use the EIN number assigned to the estate.

The 706

If the estate is large and exceeds any remaining applicable unified credit amount (which was $5 million in 2011, is $5.12 million in 2012, and will be $1 million in 2013) or you want to maintain eligibility for portability, a federal estate tax return (706) must be filed.

The 706 is due 9 months after the date of death (and can be extended for an additional 6 months.)  Use the estate EIN number to file.

As of this writing, California does not have a state inheritance tax or state estate tax, but you would be wise to consult with a qualified probate – trust settlement attorney (estate planning attorney) to determine the current state of the law and how it applies to the trust or estate you’re handling.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.

Does any of the $1 billion in unclaimed life insurance belong to you?  The Wall Street Journal has reported that state regulators estimate that there is $1 billion owed in death benefits that has not been paid.

It is thought that insurance companies are using the Social Security database to cut off annuity payments, but NOT to determine whether death benefits should be paid.

How to Find Unclaimed Life Insurance Policies

• Comb through all paperwork to locate policies, billings, or dividend statements
• Review checkbook registers, cancelled checks, and online bank accounts to see if any premiums have been paid
• Check the mail carefully for one full year after the death of your loved one to discover premium billings, dividend statements, or messages from life insurance agents or companies
• Look through address books for the contact information for insurance agents
• Review contents of fire boxes, fire safes, and safe deposit boxes
• Contact previous places of employment
• Contact insurers directly.  For example, MetLife’s “Policy Finder” website is at www.metlife.com/policyfinder and Prudential Financial Inc. has a toll free number, 1-800-778-2255.
• Contact your state’s insurance regulator.
• Use www.policylocator.com ($75 fee)

When contacting life insurance agencies or organizations, have as much information on your loved one as possible, including the full name, maiden name, address, date of birth, date of death, and Social Security number.

In addition, avoid having the life insurance on your life lost to the $1 billion unclaimed life insurance pile.  Instead, keep your life insurance policies with your estate planning documents and other important papers.  Let your loved ones know where you keep this information.

Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.