Deceased Estates: Things You Need To Know

Unfortunately, working to manage a dead estate will have to go side by side at some stage in the lives of many of us - but being familiar with what is already involved is expected to reduce the burden Will go.

It is worth remembering that the law applicable to the property and income of a deceased person depends in large part on which state or territory they died. Also note that the information presented here primarily looks at tax a responsibility (which is a federal obligation). There may be a law of state or territory, which will need to be contained.

What the Estate Comprises

The property and property of a person, who has died, known as his Deceased Estate, may include real estate, money in bank accounts, shares and personal property. Some types of income may also form part of the deceased's estate. However, some assets will not be included as the deceased may have made other arrangements to distribute them as joint tenants or to own the property.

The Deceased Estate holds the property of the person concerned in trust from the time of the person's death until the property and the estate are nominated to their beneficiaries according to their will. It is administered by either:

• An executor appointed in the will of the person, or
• Administrator appointed by Supreme Court.

Retirement and life insurance payments may or may not be part of the deceased's estate. If there are prescribed beneficiaries under the policies, the payment can go directly to the beneficiaries through the deceased property.

Being an Officer

If you have been appointed as the executor or administrator of the estate, you will be responsible for managing the tax affairs of the deceased estate, as well as:

• Fulfilling the conditions of the dead person's will
• Complying with relevant inheritance laws, where there is no will.

The executor or administrator (this information applies equally to both) is responsible for the administration of the Deceased Estate in the best interests of the beneficiaries named in the Wills (Or if none exists, the kin of the deceased person or any other person according to the law of the state or territory)

The executioner plays the role of a more or less dead man and airs his personal affairs. The tasks usually performed by an executor, but may not always be, include:

• Will testament
• Funeral arrangements
• Apply for probate
• Obtaining a death certificate
• Notifying investment bodies of death - these may include banks, building societies and share registries
• Notifying Center link and other government bodies, such as the Tax Office
• Locating and assessing assets
• Paying loan, income tax and funeral expenses
• Transferring property and paying stamp duty
• Distributing surplus to beneficiaries

Tax Responsibilities

There are usually no deaths in Australia. However, tax may be payable on certain income or capital transactions that arise as a result of a person's death.

Any tax liability that may arise from your role as executor is distinct from your own personal tax liability. Therefore do not include any income of the deceased person or Deceased Estate in your own personal tax return (except for any fiduciary income that you can receive as a beneficiary). Another item that could possibly be declared is any charge to the property for the execution services performed.

As an executor, your tax responsibilities include:

• Filing the final return for the deceased person, and any prior-year returns
• Filing of any trust tax return for deceased property
• In order to provide information to the beneficiaries, they have to include the disbursements in their own returns and, in some cases, pay taxes on their own behalf.

As the executor of the Deceased Estate, you Wills have to file a final tax return on behalf of the deceased. If they do not give pre-year tax returns, it has to be determined whether they are necessary. If so, you need to prepare and lodge them, and of course consult your tax professional that you need help with these tasks.

There may be several reasons why you may have to file a personal tax return for the deceased - for example, they may be:

• Withdraw tax from income he earned
• Earned taxable income over tax-exempt limit
• Tax withheld from interest or dividend as no tax file number (TFN) was quoted to the investment body
• Returns recorded in prior years.

Capital Gain Tax (CGT) Has Implications

When the assets of a deceased estate are disbursed, a special rule applies that allows any capital gains or losses made on the CGT property if the asset passes:

• To the executor
• For a beneficiary, or
• From the executor to the beneficiary.

However, if an executor sells the assets of the deceased and then distributes the proceeds to the beneficiaries, the sale is subject to general rules and CGT applies.

This basically means, in most cases, transferring CGT assets to a deceased estate and then not paying income tax liability to their beneficiaries.

Superannuation death benefits

In most cases, when a person dies, their superannuation fund will pay their remaining super to their designated beneficiary, known as the "Super Death Benefit".

If there are no binding death nominations, the trustees of the super fund will decide how the benefits will be paid. Depending on the trust deed of the superannuation fund, and the rules and regulations that work for the superannuation, the trustee can pay it to the deceased estate, and then the executor will behave accordingly. However, super is not part of the will.