10 Apr My aunt died. What is my job as her executor?

Q. My aunt died in New Jersey in 2014 and left her assets to my siblings and me. I am the executor. It took awhile but after filing necessary inheritance and estate tax returns for the year of death and subsequent years, assets were consolidated but not distributed. I have a lot of questions.
— Inexperienced executor

A. It’s important to note the New Jersey inheritance tax is due eight months from the date of death. The estate tax return would have been due nine months from the date of death.

“These are ‘once and done’ returns,” said Nancy Heslin Reading, an estate planning attorney with Reading Law Firm in Newton. There are no annual updates, she said.

Heslin answers your other questions below.

Q: In October 2017, the accountant filed Form 1041 for the last year of estate activity, but stated on the form that it was not final because real estate was being considered for sale.

A: From this I conclude that the estate did not have sufficient taxable income to file a Form 1041 annually, because a 1041 for an estate is like a 1040 for individuals. A 1041 return is due every year that the estate has taxable income.

Q: In November 2017, the real estate interests were transferred on paper (i.e. deed) to designated beneficiaries (all specified nieces and nephews).

A. All the capital gains through the aunt’s date of death are wiped out. Basis for the nieces and nephews would start accruing on the aunt’s date of death, but no capital gains tax would be due until the property was sold.

Q: In the beginning of the following year, the final distribution of assets (stocks) was made. There was one stock position distributed three ways to three designated recipients and retained as stock. The rest of her equities were sold and proceeds distributed evenly among all beneficiaries.

A: So we’re guessing this was 2018. Was a 2018 1041 filed? I cannot tell without knowing the asset values, but it looks like it should have been filed. If there was appreciation on the assets since the aunt’s date of death, the gains are taxable and the burden is typically on the estate, although without reading the tax clause in the will — if there is one — I can’t be sure.

Q: These assets were held in a revocable trust that my aunt created before her death.

A: Income from assets in a revocable trust are typically reported on the grantor’s (aunt’s) tax return while she is alive. Depending on the terms of the trust, it may have become irrevocable at her death, at which time an annual 1041 would be required for the trust and the trust would pay income tax until the distribution of the trust assets and the termination of the trust.

Q: Is there a lifetime gift exclusion I should be asking about?

A: Yes. It was $5.34 million for 2014.

Q: Where does it get accounted for in the tax returns?

A. If lifetime gifting and the estate distributions exceed that amount, an IRS Form 709 would be filed.

You should probably meet with a certified public accountant to make sure all the proper forms are filed.

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This story was originally published on April 10, 2020.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.