As we happily turn the calendar to January 2021, many start gathering receipts and documents to prepare for tax season. If you serve or have been recently appointed as a Personal Representative, Executor or Administrator, there are some important income tax issues you should be aware of to avoid legal action from the Internal Revenue Service (“IRS”), or lawsuits from the decedent’s beneficiaries. Below are some answers to a few frequently asked questions concerning estate tax filings:

Q: When is a decedent’s final tax return due?

When someone dies, their tax year ends as of the date of death. The Personal Representative (Executor or Administrator) is responsible for filing the final federal and state returns and ensuring that any tax due is paid. These returns are due April 15 of the year after the date of death. If someone dies before filing a return for the prior year, the Personal Representative must make sure that the return is filed and any taxes paid. The IRS is one creditor you don’t want to mess with, as they can hold a Personal Representative personally liable for unpaid taxes.

Q: What is a “Step-Up in Basis”?


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Franchise and multilevel marketing (MLM) businesses are often attractive because they offer people the chance to start a small business with a well-known brand and an established business model. However, they present unique estate planning challenges than other types of small businesses because the rights and obligations of franchisees and multilevel marketers are spelled out in contractual agreements.

What Is a Franchise?

When you purchase a franchise, you are purchasing a unit from a company that is already established in a particular industry. As a franchisee, you are entitled to use the company’s business model, advertising resources, and products, and receive training and ongoing support from the company to enhance your chances for success. In return, you must adhere to specified business practices and standards. The cost of purchasing the franchise can be quite high, and there are typically also ongoing fees for support and royalty payments for the use of the brand name.

What Is an MLM Business?

In an MLM business, you benefit from having established products to sell and the use of the company’s advertising materials to promote them. You earn money by selling the company’s products and recruiting other sellers whose sales provide you with additional income. MLM businesses usually offer flexible schedules and do not require substantial initial costs, though the company may require a minimum monthly purchase of products. Those who have a large network of friends and acquaintances and are friendly and extroverted are more likely to succeed, as MLM businesses involve presentations of products to generate sales.

How Do These Business Types Impact My Estate Planning?


Continue Reading Estate Planning for Franchise and Multilevel Marketing Business Owners