When You Are a Beneficiary in an Estate, What Expenses Do You Pay?
The executor of an estate has contacted you with the news that you have been named a beneficiary. Amidst the complex emotions of losing someone you may have been close to, you also need to deal with practical concerns.
You may wonder whether you need to pay any expenses based on the assets you receive. There’s actually no universal answer.
What you owe (or don’t owe) will be based on the assets you receive. Let’s take a look at some potential estate expenses and if you’ll need to pay them.
Estate Expenses Explained
During the probate process, estates can incur many expenses. These are the five most common:
1. Taxes: Estates may have to pay inheritance, estate or income tax, plus any other outstanding tax bills the deceased person had not paid when they passed away.
2. Outstanding debts: If someone has, say, a huge credit card bill, it doesn’t simply vanish when they die. The executor will reach out to any debtholders to inform them of the passing, and the creditors may choose to make a claim against the assets held by the estate.
3. Property maintenance: Until a property goes to the beneficiaries or gets liquidated, the estate has to maintain the upkeep.
4. Property distribution: The estate may run up costs from having to transport people or property while the estate gets settled.
5. Fees: Anyone hired to settle the estate, like an attorney or accountant, must be paid for their work. Filing documents during probate might also spark fees. And the executor may decide to take a service fee, too.
Some people also consider expenses from burial, cremation, interment and funeral as estate expenses, though often these can be taken care of by using death benefits from the life insurance of the deceased.
What Expenses Does the Estate Cover?
The good news is, the estate will cover many of the expenses generated after the beneficiary’s death, including:
· Income taxes.
· Property taxes.
· Estate property repairs and maintenance.
· Appraisals for real estate value.
· Closing costs if a home is sold.
· Initial fees for a death certificate.
As a beneficiary, you don’t get to see the financial records of the deceased, but you do get to access records of what expenses the estate paid out.
What Expenses Do Beneficiaries Have to Pay?
As a beneficiary, you may hope you don’t have to pay anything for what you inherit. But you may have to cover a few things depending on what you receive. A few expenses that would be left up to you include:
· Property transportation or maintenance fees the estate doesn’t cover.
· Travel expenses for yourself to take care of your role in the inheritance.
· Legal fees if you choose to challenge the will.
· Any other expenses the estate or the deceased’s life insurance policy doesn’t cover.
Estate planning can be difficult to think about, but understanding it is critical for a smooth process. If you feel uncertain, please reach out to Jay, who can recommend some great resources.