42. How are taxes handled in probate?

When a person dies, the date of death establishes the end of the tax year for the decedentA person who has passed away., and establishes the start date for the decedent’s estateThe assets and liabilities left behind by a decedent.. The estate is a new, separate entity for tax and legal purposes. For federal taxes, the personal representative may need to prepare: 1) Form 1040 Federal Income Tax Return for the decedent; 2) Form 1041 Federal Fiduciary Income Tax Return for the estate; 3) Form 706 Federal Estate TaxA tax imposed on the transfer of property after a person passes away, whether the transfer is by will or by the laws of intestacy. Return; and 4) Form 709 Federal Gift Tax Return(s). The personal representative will also need to prepare similar tax returns for state and/or local taxes. There may also be past years’ taxes which have not been paid which the personal representative should address.