Estate Planning: Paying Estate Taxes - T. Rowe Price

There are numerous ways in which your will and/or trust agreement (or the laws in your state of legal residence if you have no will) could instruct your executor or trustee to pay your estate taxes, fees, and other final expenses. Some tax clauses, for example, require that all taxes be paid from the remaining estate after specific bequests have been addressed, some require that they be prorated across all taxable assets, others dictate that they be paid only from probate assets, and so forth.

Depending on what your documents (or the laws in your state of legal residence) say about the source of payments of taxes, fees, and other expenses, certain beneficiaries could end up inheriting more or less than you were expecting they would. If you have numerous beneficiaries in your estate plan and you have estimated that you could have a significant estate tax liability, you should review the instructions in your will and/or trust agreement concerning the payment of federal and state estate taxes to determine which beneficiaries will be most affected.