who pays the income tax on and estate?

Answer 1

I assume you refer to Federal income tax and estate/gift tax liability. First, the Executor/ Administrator of the decedent's estate must file a Federal (and state) income tax for the year in which the decedent died. Secondly, the E/A must properly determine the value of all the decedent's probate and non-probate assets for the purpose of determining whether the estate owes a tax to the Federal (or state) government. Lastly, if the estate holds income-producing assets then the E/A will either file a Federal (and state) income tax return and pay the appropriate tax due, or the E/A will elect to pass that income through to the beneficiaries who, in turn, will report his or her share of that income on his or her Federal (and state) income tax return.
If you are the Executor or Administrator of an estate you will be personally liable for ensuring full payment of any and all Federal (and state) estate and gift taxes and any and all Federal (and state) income taxes. If you are not fully confident of your ability to recognize the various tax issues and address then correctly in a timely fashion, then you should seek the advice of a lawyer and/or an accountant with the relevant expertise to assist you.

Answer 2

If the estate is large enough, it files a form 706 and works as stated above. The estate sends the tax directly to the government.

Even if the estate isn't large, there may be income to the estate (the estate is the assets on the date of death), say money in a bank account draws interest. This income is reported to the government on a form 1041. The executor also does this form. The executor may choose to pay the income tax or he can choose to pass the income and the tax obligation through to the beneficiaries. If so, he issues form 1041 schedule k-1 to show the amounts and type.

In addition to the above, if a tax deferred account such as an IRA is left, all of the deferred income is taxed to the beneficiary who receives it.

Answer 3

The taxes are paid by the estate itself, out of money that would otherwise go to the heirs, but does not, because it goes directly from the estate to the government.