Court Bonds

Death and Taxes: Who Pays What?



While the saying “you can’t take it with you,” is true of our money and possessions, taxes do follow us into death, remaining due until paid off, usually by the personal representative or other fiduciary designated to handle our affairs. Generally, three types of taxes are paid out of the estate before assets can be inherited.


Estate, Personal Income and Fiduciary Taxes

Among the duties of the personal representative appointed to handle the affairs of the deceased is the responsibility of ensuring that three types of taxes are paid off before any assets can be gifted to beneficiaries: estate taxes, personal income taxes and fiduciary taxes. Essentially, the personal representative (who depending on location and circumstance, can be referred to as the executor, administrator or trustee) must get all the taxes paid off, but the expenses themselves belong to the estate:


All taxes are paid out of the estate funds….The Personal Representative of the decedent’s estate is responsible for filing the decedent’s final personal income tax return, the fiduciary income tax return for the estate, and the estate tax return (if needed). If there is a trust, the Trustee would be responsible for filing the annual fiduciary income tax return for the trust.


Typically, the Personal Representative (or Trustee) would engage an estate administration attorney to prepare the estate tax returns (both state and federal, if needed) and a Certified Public Accountant (“CPA”) to prepare the decedent’s final personal income tax return and the fiduciary income tax return. It is best practice to have one CPA prepare the decedent’s final personal income tax return and the fiduciary income tax return, so income earned in the year of the decedent’s death can be allocated correctly between the two different returns.


The payoff of estate taxes, which are sometimes referred to as “inheritance taxes”  includes both federal estate taxes and state estate taxes. It is helpful to note that for many families estate taxes are not a consideration: 


A decedent’s estate will be subject to federal estate taxes if the value of the estate exceeds $13,610,000 (for 2024)….In 2026, the federal estate tax exemption is set to drop to $5,000,000….For estates valued over the federal exemption amount, the estate is taxed on only the amount that surpasses the…threshold. The federal estate tax rates range from 18-40% depending on how much is over the limit. Each tier has a base tax amount that is paid before the tax rate is applied. The base tax amounts range from $0 in the first tier to $345,800 for the top tier….Depending on the state where the decedent resided, their estate may also be subject to state estate taxes.Seventeen states and the District of Columbia impose taxes on estates (or inheritances). The exemption amounts and tax rates vary by state.


Personal income taxes are another factor in reconciling the affairs of the deceased. Specifically, “income taxes on the income the decedent earned in the year before their death,” must be paid out of the estate, and the personal representative must be sure to do so, filing under the Social Security number of the deceased, by April 15 in the year following the death:


If the decedent would have received a tax refund, the check would become part of the estate funds and administered to the beneficiaries. Alternatively, if the decedent owed the IRS tax payments from previous years or had failed to file in the years before their death, the estate must pay the income tax bill.


Income Earned By The Estate? Fiduciary Taxes

Another tax responsibility a personal representative or trustee needs to be aware of and potentially attend to is fiduciary income tax, which typically comes into play when an estate plan involves a trust and the trust has earned income, such as interest:

When established, an estate (or trust) is a separate legal entity that has its own tax identification number (often referred to as a “TIN” or “EIN”). Since the estate or trust is an independent legal entity, it is also responsible for income taxes on any income earned during the  estate or trust administration.”


Personal Representative Duties and Bonds Explained

Ultimately, the settling of our affairs is the responsibility of the individual we have designated to handle them, such as a personal representative, executor or trustee. Although it is common to appoint a close relative or friend, professional fiduciaries are also a possibility, and in some cases very helpful, given the many duties that must be attended to before the beneficiaries of an estate can receive any of the assets. 

Regardless of the nomenclature or circumstances, all fiduciaries have significant, legally binding responsibilities. Given the gravitas of the role, a type of bond, sometimes referred to as a personal representative bond is often required by courts. Essentially, a personal representative bond serves as a guarantee that duties will be carried out in accordance with the law, and in the best interests of beneficiaries. Colonial Surety makes it easy and speedy for personal representatives and all fiduciaries to obtain their bonds: simply get a quote online, fill out the information, and enter a payment method. Print or e-file the bond from anywhere.

Personal Representative Bonds HERE


Estate Practice?

Colonial Surety Company makes it easy and speedy for attorneys across the country to quickly obtain personal representative and other fiduciary bonds on behalf of clients. Our user-friendly online service allows you to quickly and efficiently quote and obtain fiduciary and court bonds.


With a few clicks on The Partnership Account® for Attorneys, you’ll select the bond needed, send it to your client for payment, and then download, e-file or print the bond. 

Our fiduciary bonds include: administrator, estate, executor, guardian, personal representative, probate, surrogate, trustee, conservator and the list goes on. Court bonds include: appeal, supersedeas, injunction, replevin, receiver and more. 

Speedy, easy fiduciary and court bonds are a few clicks away:

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Colonial Surety is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed, and licensed for business everywhere in the USA. Our customers have awarded us a 4.8 Trustpilot score.Whenever and wherever you need a bond, trust Colonial: