If you die and leave an estate, you will use IRS Form 1041 to file and pay federal income taxes each year. In the eyes of the IRS, your property is treated as if it were a person: it gets a tax id number and must pay taxes on income. Who takes care of this? It’s up to you, and this is usually designated in your will. This person is called your executor.
What Does an Executor Do?
Aside from sorting out your will, the executor will make sure all your financial property is appropriately distributed or managed. Life insurance claims may have to be filed if you died unexpectedly. Your Social Security benefits will stop but if you have a surviving spouse they will go to him or her. The executor makes sure this happens.
Now, if there is money or other property left in your estate after all your bills are paid, the estate lives on. Most people turn over the management of the estate to a lawyer. He or she makes sure taxes get filed and paid, and that investments are managed properly. If the executor is capable, he or she can do this but whatever the case, someone will have to file IRS form 1041 at least once after you die.
IRS Form 1041
That’s because it basically is the same…income minus deductions = tax. Nice and simple. The estate can even make a charitable contribution, just as if it were a real person, and it can get a deduction for it too, just like a real person. We’ve almost covered all the parts of the 1041, it’s so simple. Just two pages, and must of it may not even be applicable to many executors’ estates.