Decedent

What Is a Decedent?

"Decedent" is a legal term used by professionals in the tax, estate planning, and law fields for a deceased person. When a decedent is a legitimate taxpayer, all of their possessions become part of their estate, and they are denoted as decedent or deceased. Decedents have legal power over final transactions and other estate preparations if they made the legal preparations before their death.

Understanding a Decendent

From a financial perspective, a decedent does not cease to exist after they die because almost everyone leaves behind assets. Attorneys and trustees carry out a decedent's wishes after their deaths by executing what is in their wills and trusts. Decedents are also required to file a final tax return for the year of their death, and the estate must pay any outstanding taxes.

When a person dies, they become a decedent, and their will and trust remain to give directions for handling their money and other assets. The legal process of executing a will or trust always refers to the deceased as a decedent and requires filing a final tax return that lists the entire estate.

Establishing a trust prior to death is important because it allows a person to transfer the legal rights of his assets to another person before he dies. This process often reduces estate taxes. Also, it grants the trustee — the person acting on behalf of the decedent — the immediate authority to distribute assets upon death. Finally, without any courts involved, the estate does not have to pay any court fees. 

$55,000

The amount the median recipient will inherit, as of 2016, the most recent figures available, according to research by United Income. This amount will not trigger estate taxes.

Tax Implications for a Decedent

If you die and owe federal or state taxes, your estate will be responsible for paying them. There are two kinds of other taxes, often referred to as "death taxes" in popular culture — Estate and inheritance tax. Until 2025, the estate tax exemption (on the federal level) is $11.58 million. Because this figure is so high, most American families will unlikely need to worry about it.

However, in 2025, this law fades into the "sunset," If it is not renewed in Congress, the amount will return to $5 million, which is still a lot more than most heirs will ever see. State tax exemptions either match the federal level or vary depending on the state the decedent resided in at the time of their death.

Inheritance tax is a different kind of tax. The federal government does not take an inheritance tax, but six states impose inheritance taxes, like Pennslyvania and Nebraska.

Decendents and Trusts

Many financial advisors recommend that their clients create a trust to protect their assets. When a trust is created, the trustor transfers legal ownership of his assets to a person or institute named as the trustee. The trustee's job is to manage the assets on behalf of any beneficiaries named in the trust.

The creation of a trust establishes a fiduciary duty for the trustee. This means that the trustee is legally responsible for making decisions in the best interests of the beneficiaries outlined in the trust. This is intended to provide peace of mind for a decedent that their assets are allocated correctly. The trust beneficiaries receive some or all of the benefits when the trustor becomes a decedent.

Example of a Decedent

Let's say Mary created an estate for her family after retirement. After her death, Mary became a descendent. She leaves life insurance, $15,000 in a checking account, and a small retirement fund. The decedent's remaining debts are paid from the decedent's estate, along with any money owed in taxes on the decedent's final tax return. In addition, Mary names the beneficiaries for her life insurance, and on her death, those funds are paid out to the individuals named on her benefits.

Decedent FAQs 

How Do I Report Income in Respect of a Decedent?

The income in respect of a decedent and final earned income must be reported to the IRS, and their final taxes must be filed by the trustee of the decedent's estate. Both forms of income can include wages, social security payments, tips, sick pay, vacation time, and retirement income, to name a few.

What Is the Difference Between Deceased and Decedent?

A deceased person is a dead person. A decedent is a legal term for someone dead often used in estate planning documents. When a person dies, they become a decedent. Still, in some ways, their name lives on due to their financial obligations after death, such as paying taxes, closing bank accounts, and other items — all carried out by their trustee who acts on behalf of the decedent.

What Type of Trust Is a Decedent Trust?

A decedent trust is another name for a joint trust called an A-B trust. A married couple sets up this type of trust to minimize estate taxes. An A-B trust is formed between two spouses, but the trust divides once the first spouse dies. The parts represent the survivor (trust A) and the decedent (trust B).