Tax Issues and Probate

When someone passes away, there are several tax issues with regard to that person’s estate that must be addressed.  An individual income tax return for the decedent for the current year must still be filed.  Additionally there are multiple estate tax returns that must be filed as well. The personal representative is responsible for taxing care of these tax issues, making sure all forms are accurate and timely filed.  Generally, the personal representative retains a professional familiar with estate tax issues to help them with the process.

The personal representative must make sure that individual income tax returns are filed for the decedent in the year of death and for the previous year, both at the state and federal levels.  These returns can still be filed jointly with the decedent’s spouse, though it may be easier to file individually in most cases.  Keep in mind that income tax returns may need to be filed in other states as well.  All of the decedent’s income must be tracked down and accounted for.   These generally must be filed on April 15th of the year of the decedent’s passing.

Estate tax returns also need to be filed at both the state and federal levels.  The Federal Estate and Generation Skipping Transfer Tax Return is due 9 months after the decedent’s death, although an extension may be granted if more time is needed.  If the decedent’s gross estate is less than the current estate and generation skipping tax exemptions, then no filing is necessary.  However, keep in mind that the gross estate includes both probate and non-probate property and that both must be listed on the form.

Arizona no longer imposes the “pick-up tax,” or state estate tax, so unless the legislature reinstates it, no filing or estate tax is due at the state level.  This may be different in other states so it is important to assess the relevant state’s current laws.

In addition to these, a fiduciary income tax return must be filed.  Since the estate is viewed by the government as a separate tax payer, the personal representative must file and pay any income taxes incurred by the estate, from the funds of the estate of course.

The personal representative may want the assistance of a Tucson probate attorney, as well as that of a CPA, preferably the decedent’s CPA, who will already be familiar with the decedent’s finances.  This will make the process much more smoothly and likely save the estate money in the long run.


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