Terminal Year

AAA

DEFINITION of 'Terminal Year'

The year in which an individual dies, in the context of estate planning and taxation. Terminal year is used in estate planning and taxation because special tax rules and handling of income and assets may apply during the taxpayer's final year. In Canada, the terminal year refers to the portion of the calendar year during which the individual was living, from the first of the calendar year (January 1) up to the person's date of death.

INVESTOPEDIA EXPLAINS 'Terminal Year'

The terminal year is considered for tax and estate handling purposes. The deceased will be subject to tax liabilities on any income earned, or realized, during the terminal year, similarly to previous years of taxation. Certain deductions, income and assets may receive special tax treatment during the terminal year, as part of the estate taxation process. Certain tax forms are required to be filed for the terminal year of the decedent. In Canada and the United States, for example, the surviving spouse, executor or administrator of the estate must file a "final return" on behalf of the decedent.

RELATED TERMS
  1. Marital Trust

    A fiduciary relationship between a trustor and trustee for the ...
  2. Income Tax

    A tax that governments impose on financial income generated by ...
  3. Estate Planning

    The collection of preparation tasks that serve to manage an individual's ...
  4. Terminally Ill

    A person who is sick and is diagnosed with a disease that will ...
  5. Internal Revenue Service - IRS

    A United States government agency that is responsible for the ...
  6. Deferred Tax Asset

    A deferred tax asset is an asset on a company's balance sheet ...
Related Articles
  1. Taxes

    Don't Put Off Your Year-End Tax Plan

    From sales tax deductions to credit reports, check out what items should be on your financial checklist.
  2. Retirement

    In-Depth Guide To Estate Planning

    The process of planning your estate takes careful consideration. Skip any of these important steps, and your estate could be mishandled.
  3. Options & Futures

    Getting Started On Your Estate Plan

    With some preparation, you can save your heirs from paying a hefty estate tax. Here are some tips.
  4. Options & Futures

    Three Documents You Shouldn't Do Without

    Estate planning is not just about the division of assets after you die. Read on to save your loved ones extra grief.
  5. Options & Futures

    An Estate Planning Must: Update Your Beneficiaries

    Life changes make it time to rewrite your plan's designations.
  6. Options & Futures

    Your Will: Why You Need A Power Of Attorney And Beneficiaries

    What would happen if you were suddenly unable to manage your financial affairs? Preparation is the best protection.
  7. Retirement

    Estate Planning For Canadians

    Trusts, wills, taxes and rules differ by country. Find out what you need to know about estate plans in Canada.
  8. Taxes

    What is the difference between gross income and earned income?

    Being able to distinguish between earned income and gross income is an important tool in preparing for and filing your individual tax returns each year.
  9. Taxes

    What is Value-Added Tax (VAT) and who pays it?

    Learn about the definition of value-added tax, the necessary circumstances that require a business to pay it and when a business is exempt.
  10. Budgeting

    Can trust funds be activated before the grantor intended?

    Trust law gives the grantor specific rights over the release of assets and therefore it is not possible to change the stipulations without his or her consent.

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center