Your beneficiaries (the people who inherit your estate) do not normally pay tax on things they inherit. Before a person's assets may be distributed to the beneficiaries, the executor must first pay any outstanding debts and file taxes on behalf of the deceased. Unless you are living abroad, the solicitor dealing with the case will generally not deal with your tax return for you. Typically, any person or entity can be named a beneficiary of a trust, will, or a life insurance policy. When a trust makes a distribution, it deducts the income distributed on its own tax return and issues the beneficiary a tax form called a K-1. Find the answer to this and other Law questions on JustAnswer. It's just a matter of timing. These may include taxes, personal and bank loans, credit card accounts and mortgages that fall due on the death of the borrower. At a minimum, the Uniform Trust Code requires the distributions of income to be paid annually. All these benefits aside, the drawbacks of using a discretionary lifetime trust are the same as those of using a staggered trust. Meanwhile, property that's held back in the beneficiary's trust fund can be used by the trustee to pay for the beneficiary's college or graduate education, medical bills, a car, housing, or ​other day-to-day needs. "Types of Trusts and Living Trusts." The Company Can Only Pay the People Listed as Beneficiaries A life insurance policy is a contract, and the insurance company is obligated to pay only claims made by … So Beneficiaries who are entitled to a share of the residuary Estate will be paid after those who are receiving specific cash gifts. Further rights of beneficiaries. A probate is a legal process that establishes the validity of a will. Estate planning involves more than just figuring out who will inherit your property when you die. The beneficiaries want to reduce the amount of inheritance tax to be paid. However, they are not entitled to know everything. In some cases, this may result in a modification of the terms of the will. There is a legal rule known as “the executors year” that allows the executor a year to assess the estate, obtain probate, collect assets and settle liabilities. Approximately 70% of families have lost their wealth by the second generation, and this number jumps to 90% by the third generation, according to the Texas law firm of Romano & Sumner.. Beneficiaries of a trust typically pay taxes on the distributions they receive from the trust's income, rather than the trust itself paying the tax. The house sold within thirty days and I was able to keep the funds going for the trust for future expenses. They can then distribute the estate to the remaining heirs, safe in the knowledge the insurer will meet the costs of any later claim. Do Beneficiaries of a Will Have to Pay Inheritance Tax. Paying beneficiaries of a will ? Timely Distribution. 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