My son lived and passed away in the state of Tennessee this past year. What are my state laws about paying out the proceeds?

[DianeW · Accepted solution]

I am very sorry about the loss of your son.  

Estate tax rule for the State of Tennessee is shown here: If you live in Tennessee, you may know that your state used to impose its own estate tax, but that the tax ended in 2016. The tax continues to apply to any deaths that occurred before 2016. However, a large personal exemption applied -- for deaths in 2015, estates with a value of up to $5 million were exempt from Tennessee estate tax.  

As far as the federal return, there may be an estate tax return due (Form 1041) if there were earnings after death of $600 or more.  This would be interest, dividends, capital gains from sales or any other type of income derived from the estate before distribution to the beneficiaries. Form 1041-K1 Instructions

If there were no earnings on the core holdings in the estate property after death and before distribution, there is nothing to do except to distribute the assets to the beneficiaries.  The proceeds paid to the beneficiaries is not income on their tax returns. 

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