Once you determine that a federal estate tax must be filed for your loved one’s estate, your next big task is to determine how the tax will be paid. The amounts owed may be substantial. In an ideal world, your loved one will have planned for this at the time that the estate plan was created. Often, however, this is not the case. If there are not easily accessible liquid assets for paying the tax, you will have to determine which assets should be used in order to pay the estate’s obligations. The following are nine helpful steps to consider: 

  1. Review the terms of the Orange County living trust to determine whether there are specific instructions for which assets should be used to pay the taxes.
  2. Utilize cash if there is a checking or savings account with funds that are readily available.
  3. If necessary, consider liquidating publicly traded stocks and bonds.
  4. Use life insurance proceeds that are payable to the trust.
  5. Consider borrowing against any real estate.
  6. Considering selling real estate.
  7. Consider selling the stock of a closely held business.
  8. Consider requesting an extension for the time to pay the taxes while demonstrating an undue hardship.
  9. Utilize various elections to stretch out the payment of the tax if the estate contains a specific type of asset.

For more information about educational expenses and discretionary distributions, consult with an experienced Orange County trust administration attorney today. Contact our office today at (714) 459-5481 for more information.

James F. Roberts
Founder and owner of the Law Office of James F. Roberts and Associates, a premiere estate planning law firm
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