If you are considering engaging in estate planning or you may be inheriting assets, it is important to understand what the step-up in basis is and how it may affect you.
“Decedent” is a legal term that refers to a person who has died with unsatisfied legal obligations.
At the end of their life, a decedent has some legal duties that must be fulfilled through a representative. For example, decedents remain obligated to satisfy certain debts incurred during their life and file their last income tax return.
What Is the Difference Between a Decedent and a Deceased Person?
A deceased person is someone who has died. While the word “decedent” also refers to a person who has passed away, it denotes a legal status as well. Essentially, all decedents are deceased people, but not all deceased people are decedents.
The word “decedent” is mostly used for estate planning purposes. For example, you may see this term in a last will and testament, or in estate closure documents related to closing a deceased person’s bank account and filing their final income taxes.
In addition to finalizing an estate, if a person was a party in an active civil lawsuit before they died, the word “decedent” will be added to the party’s name in court documents to signify that a representative is continuing with the case.
How Are Their Legal Obligations Fulfilled After Death?
Decedents have legal obligations after their death. Since they cannot perform these duties, the person they appointed before their death must meet any obligations. These legal responsibilities must be handled according to state law if the deceased person did not name a representative before they died.
Duties that someone has after they die that must be completed by their representative include the following:
- Notify banks, credit card companies, and other creditors about the death of the individual. Also, government agencies must be notified, including Medicaid, Medicare, and the Social Security Administration.
- File the decedent’s last will and testament with the probate court. The representative will also be responsible for representing the decedent’s estate in court.
- Pay any of their outstanding and payable debt.
- File income taxes.
- Open a bank account for the estate. The representative will pay bills, debts, and taxes from the new account.
- Distribute the estate’s assets to the heirs named in the decedent’s last will and testament, or ensure that the heirs at law receive the appropriate property if assets are passed down via intestate succession.
What Is Included in Their Estate?
A decedent’s estate includes all the property they owned when they died. Examples of property included in their estate may include:
- Property (i.e., their home)
Their estate must go through the probate process before the estate is closed. Some property may be included in the estate but is not subject to probate, including life insurance.
What Is a Decedent Trust?
Also called an A-B trust, this type of trust is created between a married couple and dissolves when the first spouse dies. Its goal is to reduce the amount of estate taxes.
If you would like guidance on estate planning for yourself or for administering an estate following the death of a loved one, be sure to consult with your attorney.