Many fiduciaries are surprised to learn that estates and trusts may need to make quarterly estimated tax payments—not just file an annual return.
Understanding when payments are required can help you avoid penalties and interest.
When Are Payments Required?
Estimated payments are required if:
- The estate or trust expects to owe $1,000 or more in federal taxes
- Withholding and credits won’t cover the liability
Michigan requires payments if more than $500 in state tax is anticipated.
To avoid penalties, fiduciaries must usually pay:
- 90% of the current year’s tax, or
- 100% of the prior year’s tax (110% for higher-income entities)
Estate vs. Trust Rules
Estates:
Typically receive a two-year grace period from estimated payments after death.
Irrevocable Trusts:
Do not receive a grace period. Because trust tax brackets are compressed, retained income can quickly reach the highest federal rate.
Why Guidance Matters
Trustees and executors are legally responsible for meeting IRS and Michigan deadlines. Waiting until year-end can result in avoidable penalties.
An estate planning attorney in Ann Arbor can help coordinate with tax professionals and ensure your fiduciary duties are met properly. Contact us today to schedule a consultation!
This article is not tax advice. Please consult a CPA for professional tax guidance.
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