Decedent

Decedent is just a legal way of saying "deceased" or "person who has passed away".

You'll usually see this when people are talking about wills, trusts, life insurance policies, probate, and estate settlement.

That's because all of those are financial instruments or related to financial processes used to move around and/or give assets to beneficiaries after someone passes away.

Someone's financial life doesn't disappear when they become a decedent

When someone passes away and becomes a decedent, it sets into a motion a variety of events that can broadly be placed under the umbrella of "estate settlement". Things someone owned (assets) and debts have to be correctly distributed or resolved in the eyes of court. This is generally known as probate. And while not everyone has to go through probate, the vast majority of people do. Exclusions usually center around extremely small estates, or decedents who passed away with virtually no assets.

In the end, someone who was appointed by the decedent before they passed or petitions the court to become involved, is named as the executor or personal representative and must distribute assets according to the terms defined in someone's will, trust, or local intestate laws if the decedent died without a will. The idea is to resolve all debts by paying out and filing notice to any creditors, selling any assets if needed to cover those debts, file a final tax return on behalf of the decedent, distribute remaining assets, and end the financial life of the decedent in the eyes of the court.

This process can take anywhere from months to years, and takes longer the more bigger and more complicated the decedent's estate is.

For salient advice on navigating and getting through estate settlement in record time and for the least amount of money, this guide is a fantastic resource: Beginner's Guide to Probate.

How decedents are related to wills and trusts

Decedents are simply a blanket legal term to refer to the person who passed away. So if the person made a will, then it would be the decedent's "wishes" or "will". With trusts, the decedent is often the trustor, which is the person who set up the trust before they passed.

What taxes does a decedent owe?

There are four main taxes to worry about in the context of a decedent: federal, state, estate, and inheritance taxes.

The first two are normal tax considerations on income etc. that the person would have paid anyone if they hadn't passed away.

The second two are considered death taxes. Estate taxes are taxes owed in certain states or provinces above a certain value threshold. In the U.S., the estate tax threshold is currently $11.58 million but will drop down to $5 million in 2025*.

While most families won't have to worry about those because they are high, if you are in the range, it's worth hiring a lawyer and tax expert to help you figure out how to minimize what you owe.

Inheritance taxes are taxes on what you receive from an estate as a beneficiary, but those only apply in certain states.

Here's a short breakdown of states with inheritance or estate taxes from the Atticus team (note that this information can change).

Connecticut: Estate tax of 10.8 percent to 12 percent on estates above $7.1 million
District of Columbia: Estate tax of 11.2 percent to 16 percent on estates above $4 million
Hawaii: Estate tax of 10 percent to 20 percent on estates above $5.5 million
Illinois: Estate tax of 0.8 percent to 16 percent on estates above $4 million
Iowa: Inheritance tax of up to 15 percent
Kentucky: Inheritance tax of up to 16 percent
Maine: Estate tax of 8 percent to 12 percent on estates above $5.8 million
Maryland: Estate tax of 0.8 percent to 16 percent on estates above $5 million; inheritance tax of up to 10 percent
Massachusetts: 0.8 percent to 16 percent on estates above $1 million
Minnesota: 13 percent to 16 percent on estates above $3 million
Nebraska: Inheritance tax of up to 18 percent
New Jersey: Inheritance tax of up to 16 percent
New York: Estate tax of 3.06 percent to 16 percent for estates above $5.9 million
Oregon: Estate tax of 10 percent to 16 percent on estates above $1 million
Pennsylvania: Inheritance tax of up to 15 percent
Rhode Island: Estate tax of 0.8 percent to 16 percent on estates above $1.6 million
Vermont: Estate tax of 16 percent on estates above $5 million
Washington: Estate tax of 10 percent to 20 percent on estates above $2.2 million

Income in Respect of a Decedent

Income in respect of a decedent (IRD) is untaxed income that a decedent earned, had a right to receive or was otherwise owed to a decedent at the time he or she died.

IRD is taxed to the estate, individual, beneficiary or entity that inherits the income, and is reported on a recipient's income tax return during the year it was received. The way IRD is reported for income tax returns typically depends upon whether it was paid to the decedent's estate, or paid directly to a beneficiary.

Common examples of income in respect of a decedent include:

- Uncollected salary, wages, bonuses, commissions, and vacation or sick pay
- Bank account interest
- Retirement plans that are taxable, e.g. an IRA
- Deferred compensation distributions
- Dividends and capital gains from investments
- Stock options exercised
- Accounts receivable paid to a small business owned by the decedent (cash-basis only)

Important note: tax rates vary widely depending on what other income is in play for each of these examples. And if the deceased owned a business, then there’s even more complexity.

Is there a difference between deceased and decedent?

Not really! It's just a legal term that means the same thing but is only used in legal contexts, most notably being conversations around wills, probate, trusts, life insurance policies, etc.