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The basics of tax deductible estate administration costs

It may be a bittersweet feeling to be chosen as a person’s executor. This largely means that you have garnered the respect and trust of the person (and their family) whose estate you are tasked to divide according to the person’s wishes. But like the old adage “with great power comes great responsibility,” there are a number of questions that an executor may have. For example, are there expenses that could (or will) reduce the estate’s value for tax purposes? Additionally, are there expenses that are tax deductible?

This post will highlight a few costs that are tax deductible. 

Attorney’s Fees – Do a deceased’s debts go with the person when they pass away? Chances are that they won’t. Because of this, some creditors may initiate lawsuits against the estate to collect on unpaid debts. When this happens, and an attorney is needed, their fees in defending the estate are generally tax deductible. 

 Administration Costs – One of the basic duties for executors is to preserve the estate and distribute property. This generally includes arranging appraisals, paying outstanding debts, as well as court costs for probating the estate. All of these costs are potentially tax deductible

Executor’s Commissions – Further, an executor could be allowed to charge a commission for the time he or she expends in making sure that the estate is preserved and properly distributed. Just like fees for other professional services (legal, accounting, etc.), the executor’s commission must be based on commonly accepted standards for estates of similar size and character to be considered tax deductible.

If you have further questions about tax deductible estate administration costs, an experienced tax law attorney can advise you. 

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