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Probate and taxes: What to know

On Behalf of | Feb 14, 2024 | Probate, Trustees Executors & Fiduciaries |

Tax season is just around the corner. Many Californians are likely receiving their W-2s and other financial statements in the mail while preparing their strategies for April filing day.

However, your tax filings may look different if you experienced significant life changes this year, such as getting married, having a child – or losing a loved one. How might a death in the family influence your taxes? Here is some critical information to know and how it may affect you. It is only natural to focus more on working through your grief after losing a loved one then concerning yourself about tax matters. Unfortunately, there are deadlines to meet and you will have to attend to those as well.

If you received an inheritance from a loved one (either as beneficiary or heir), it may be a relief to know that neither California nor the federal government will tax that (excluding retirement and annuity accounts). Therefore, you will not have to claim it as income. If you inherit real property, you personally will no have to pay past due property taxes, but one the property is titled in your name, that will change.

The details may be different if you are the executor of your loved one’s will or administrator (“their personal representative”). While your inheritance is not considered income, your compensation as personal representative is a different matter. That is indeed taxable income.

What about your loved one’s taxes?

As we discussed in a past blog post, a loved one who passed within the last year technically still owes taxes. There are still tax filing requirements.

The executor or personal representative is responsible for filing taxes on behalf of the estate.

If you prepare your own taxes you know that can be stressful. If you decide to handle the tax matters of a loved one’s estate that will be even more so. There are more details and steps that the personal representative must handle. To that end, it is imperative to get informed and prepare yourself for this tax season.

As the personal representative it is helpful to:

  • Follow your Probate Attorney’s advice
  • Review the rules regarding filing requirements if you handle the estate taxes/final return yourself
  • Gather/organize all financial statements/documents related to the estate for the attorney and CPA
  • Seek professional guidance to avoid any mistakes