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A primer for tax deductible estate administration expenses

Being an executor of a person’s estate is not simply an honorary distinction. Executors have the responsibility of ensuring that a person’s assets are properly distributed, and they must answer questions about the estate; particularly to creditors. Because of these responsibilities, executors may see it necessary to hire outside professionals to administer the estate; including defending the estate from creditors, making proper valuations and completing a host of other responsibilities.

With that, executors should have a good understanding of what expenses are tax deductible. This post will highlight a few of these expenses. 

Outside Administration Costs – Some common administration costs include appraisal fees, court costs, fees for accounting expenses, as well as interests on loans acquired to pay estate taxes. Executors should also be conscious of all costs incurred in preserving and distributing property of the estate.

Attorney’s Fees – Every estate that is administered must file a tax return. When filing such a return, the administrator is entitled to deduct fees for lawyers who prepare the return as long as they are commensurate with the size and character of the estate and the extent of the services rendered. The fees must also take into account the skills and expertise of the firm (or lawyer) completing the work.

Executor’s Commissions – Finally, the person responsible for ensuring that the estate is properly distributed may be allowed a commission for their efforts. Like the attorneys fees, the commission must be based on the usually accepted standards for estates of similar size and character.

The preceding is not legal advice. If you have questions specific for your situation, an experienced estate administration attorney can help.

 

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