Most in Saint Charles equate the tax responsibilities of an estate to be those owed in estate taxes. Federal estate tax exemptions often exempt most from owing any estate tax at all, so those administering an estate may believe that they do not have to worry about any tax liabilities. Yet estate tax exemptions do not apply to any outstanding income tax that a decedent may have owed at the time of their death. Such tax liabilities would continue to be treated like any other debts that need to be settled from an estate’s assets.
Such is the case facing the estate of Aretha Franklin, the singing icon who passed away from pancreatic cancer earlier this year. Recent reports revealed that Franklin owed as much as $6.3 million in back taxes and an additional $1.5 million in penalty fees. Her estate is disputing that amount, claiming that the Internal Revenue Service is mistakenly viewing the late singer’s touring expenses as taxable income. It’s representatives go on to claim that Franklin’s returns were filed on time every year. Yet despite their insistence that the money owed is in dispute, the estate has paid over $3 million to the IRS since the singer’s passing.
Those preparing their estates may not want to leave their beneficiaries with the burden of having to settle their unresolved tax liabilities (or any other debts, for that matter). Thus, careful planning is required to ensure that any remaining liabilities are paid prior to their deaths (or least the funds to settle them are earmarked for that purpose). Doing so may help ensure that they will meet their goals of having funds to pass on to their loved ones. Those needing help during such preparation may find it in the form of an experienced estate planning attorney.