What Are Some of The Necessary Actions for the Estate of a Deceased Individual?
It comes as no surprise that most people have no idea on what action to take to secure a family memberâ€™s, a relativeâ€™s or a friendâ€™s estate when they pass away. This often leads to cases shrouded with red tape and bureaucracy. Below are some of the necessary and important actions for the estate of a deceased person.
When someone dies, the responsibility for the management of that individualâ€™s estate falls to the deceased personâ€™s administrator or executor. The administratorÂ mustÂ obtain an estate Tax ID numberÂ and thenÂ reconciles the deceased individualâ€™s estate such as money, property and other assets, and pays their creditors. After which, the remainder is distributed to the decedentâ€™s heir(s) or beneficiaries.
The executor plays a huge role in what transpires to a deceasedâ€™s estate. Through the letters of testamentary, the executor is ratified by the probate court to make decisions in the best interests of the deceased and these include filing income tax returns for the departed. In case the deceased failed to file taxes for some time, the executor is obligated to file them on behalf of the decedent.
Upon an individualâ€™s death, the executor is obligated to file taxes for the estate, but can only do this after applying for EIN and obtaining an Estate Tax ID Number ApplicationÂ (EIN). The IRS issues EINs (a 9-digit number) to differentiate the various types of business enterprises. In case, the decedentâ€™s estate is operating a business after his/her death, the executor is supposed to apply for a new EIN through which he will report and pay any due taxes, and report and pay wages.
The other two applications that the executor needs to make are for the IRS estate trust ID and apply for Tax ID number and trust tax ID. The IRS is always available to help an individual secure an EIN or Federal Tax ID number. They have online forms that are easy to fill.
The situation also applies if the deceased had opened a trust, although there are differences depending on whether the trust was revocable or irrevocable. A trust is a legal arrangement that governs property or money held in trust for certain beneficiaries. The grantor, the trustâ€™s creator, stipulates the rules that will govern the property including who gets the capital gains, the income and so forth.
In case the grantor dies, the revocable trust (trust under the control of the grantor) income is reported under the grantorâ€™s tax returns and thus put under the EIN or Federal Tax ID number obtained by the executor. The irrevocable trust, on the other hand, requires permission from the beneficiary(s) to be altered or modified; the rights of ownership are solely with the beneficiary(s) and thus will require an alternate EIN or Federal Tax ID number. Actually, obtaining a Federal Tax ID number is absolutely required, under the law, by irrevocable trusts.
In essence, these are actions taken when a deceased leaves behind an estate.