Estate & Trust Administration For Dummies, 2nd Edition

Chapter 19

Weighing Income Tax Implications

IN THIS CHAPTER

Planning for taxes before, and after, death

Equalizing taxable income between the decedent, the estate (or trust), and the beneficiaries

Getting acquainted with the Unearned Income Medicare Contribution tax

How simple would life be if there were one set of hard-and-fast rules about how to split the income among the decedent, the estate (or trust), and the income beneficiaries? Unfortunately, no such set of rules exists. There is, however, a whole subspecialty called post-mortem tax planning, which is merely a way to legally allocate all items of income and expense to the taxpayer who can most effectively use it, whether by keeping everyone’s marginal tax brackets lower or by making sure that all deductions are usable against taxable income. All it takes is a little advance planning.

In this chapter, we show you how to keep the income taxes owed by the decedent, the estate, and/or the trust to the bare minimum. After all, no one should pay more than they’re legally obligated to pay while they’re alive, and that’s even truer after death. And there’s nothing worse than the realization that, with a little planning, you could ...