Filing Final Tax Returns for the Deceased

When a family member passes away, there are many decisions that need to be made and many emotions to handle. The last thing anyone thinks about is taxes.

Unfortunately, even the deceased can’t escape taxation. If the departed family member earned taxable income during the year in which they died, then federal taxes may be owed. An executor or survivor must, therefore, file a federal income tax return (Form 1040). If you have questions about taxes during the probate process, please feel free to bring this up with your estate planning lawyers who can advise you on tax related issues.

Future Estate Taxes Owed

Similarly, if the deceased individual had a sizable estate or assets that might generate income in the future, the estate may owe taxes. Federal estate tax forms pertaining to the decedent’s estate may need to be filed. (Form 1041, Form 706).

Income Taxes.

The Internal Revenue Service gives you until April 15 of the year following the taxpayer’s death to file a final 1040 form.  If the deceased was married, a surviving spouse has the option to file a final joint federal tax return for the last year in which the deceased lived.

If you file the return online, the IRS provides instructions on all this.  If you are filing a paper return, you must write “Deceased,” the decedent’s name, and the date of death at the top of the 1040 form.  An appointed personal representative and/or surviving spouse must sign this return per IRS guidelines.  If a refund is due, you may need to file a Form 1310 (Statement of Person Claiming Refund Due a Deceased Taxpayer).

Estate Taxes.

If an estate is large enough, Form 706 (the United States Estate Tax Return) is due to the IRS within nine months of the death of the deceased, with a 6-month extension permitted. The individual federal estate tax exemption is currently $11.4 million, so an estate smaller than $11.4 million may not be faced with estate taxes unless the deceased individual made substantial monetary gifts before their passing.

When the decedent’s estate has an executor or administrator (in IRS terminology, an “appointed personal representative”), they must must sign the return for the decedent. For a joint return, the spouse must also sign. Alternately, a survivor of the deceased can file the return.

If an estate generates more than $600 in gross yearly income within 12 months of the taxpayer’s death, it will also be necessary to file Form 1041 (US Income Tax Return for Estates and Trusts), usually by April 15 of the year after the year in which the individual died.  Should 100% of the income-generating assets of the deceased be exempt from probate, the need to file Form 1041 is removed.  Estates required to file Form 1041 should consult a tax professional.

Lastly, there are some cases where expenses paid before death can be deductible.  Under certain circumstances, part of the cost of treating a final illness may be deducted on the deceased’s final tax return.

If you have additional questions about probate, please call or our office to schedule a free consultation with an attorney at our office.

About the Author: Dustin MacFarlane, Esq.

California Licensed Attorney | Estate Planning Specialist

Dustin MacFarlane is the founder of California Probate and Trust, PC, with over 15 years of experience in estate planning, probate administration, and trust law. Licensed by the California State Bar, Dustin has helped thousands of California families protect their assets and plan for the future.

CA Bar License: Active | Practice Areas: Estate Planning, Probate, Trust Administration | Location: Granite Bay, CA

Why Estate Planning Matters in California

California has unique estate planning laws that differ significantly from other states. Without proper planning, your assets may not pass according to your wishes, and your family could face unnecessary probate court proceedings.

A comprehensive California estate plan typically includes:

• A revocable living trust to avoid probate
• Pour-over will as a safety net
• Advance health care directive
• Durable power of attorney for finances
• Beneficiary designations on retirement accounts and life insurance

How Trusts Work in California

California’s trust law (Probate Code Division 9) governs how trusts are created, administered, and terminated. Understanding these rules is essential for effective estate planning.

Key benefits of California trusts:

• Avoid probate: Assets in a properly funded trust bypass California’s lengthy probate process
• Privacy: Unlike wills (which become public in probate), trusts remain private
• Control: You maintain control during your lifetime and direct distribution after death
• Incapacity planning: Your successor trustee manages assets if you become incapacitated
• Tax planning: Trusts can help minimize estate and income taxes