Financial obligations can quickly become a complicating factor during estate administration. Personal representatives overseeing estate administration often need to be careful about how they manage resources, as they could be personally liable for debts and financial obligations they fail to address.
Sometimes, people die with more debt than property. Their loved ones may then face a scenario in which their inheritance goes to pay off medical bills, student loans or credit card balances. The personal representative must communicate with creditors and pay the debts in the right order. Other times, a highly valuable estate can trigger similar but different challenges.
Specifically, the personal representative may need to use estate resources to pay estate taxes. Estate taxes can significantly diminish the value of a large estate. Personal representatives who fail to retain enough property to cover tax obligations might be at risk of facing personal financial responsibility for those taxes later.
When does a personal representative need to retain assets to cover estate taxes?
Multi-million dollar estates are vulnerable
The good news for those overseeing the probate process of an estate in Georgia is that most estates are not subject to estate taxes. There is no state-level estate tax that applies. Therefore, the only estate tax that might diminish the value of the estate is the federal estate tax.
Every year, the federal standards for estate taxes change. The entirety of the estate is exempt from taxation until the overall value of the estate reaches a specific threshold. For estates of individuals who die in 2025, the federal estate tax threshold is $13.99 million.
The total value of the estate has to exceed that amount for estate taxes to apply. The specific tax rate depends on how much the overall value of the estate exceeds the current threshold. The tax rate could be anywhere from 18% to 40%, depending on the value of the estate and any prior planning on the part of the testator.
Personal representatives concerned that estate taxes may apply might require support throughout estate administration to better protect themselves and ensure legal compliance. Understanding tax obligations and other financial responsibilities that arise during probate proceedings can protect personal representatives from personal liability.