Settling an estate after a death can be expensive. However, many people aren’t always aware of the costs that will need to be paid by their estate after their death. These costs include settling a variety of debts incurred during the client’s lifetime, as well as costs and taxes incurred due to the client’s death.
Costs and taxes that need to be accounted for include the following:
- Funeral costs. Modest funerals can run between $5,000 and $10,000.
- Any remaining medical bills or long-term care costs incurred during the decedent’s lifetime. End-of-life medical expenses, whether hospital bills or long-term care costs.
- Credit card bills and other debts incurred by the decedent. This can also include mortgages, student loans, and other debts.
- Federal estate taxes and state death taxes. Twenty states have a state estate tax or a state inheritance tax.
- Federal and state income taxes. The decedent’s estate will be responsible for paying the taxes for the final year of the decedent’s life. Further, the estate and/or trust will owe income taxes during any period of administration.
- Probate and administrative costs. These include such items as legal fees, appraisal fees, and executor or trustee fees. Having a living trust avoids these expenses
- Payment of cash bequests whether to family, friends, or to fulfill planned giving promises made to non-profits.
Without taking these costs into account during the estate planning process, the executor of the estate (or trustee of the trust) may be forced to sell precious property, possessions, or the family business in order to cover theses costs.