When an executor or personal administrator begins managing an estate, he or she should know that California has tax requirements for probate estates. Beyond filing federal tax returns, the administrator may need to comply with specific state laws regarding taxes.
Which Taxes Might the Estate Owe?
Depending on the deceased person’s financial status at death, the estate may need to pay federal estate taxes, as well as both federal and state income taxes. The executor or administrator should speak to an accountant to decide what to file, but in general he or she may need to prepare a federal “fiduciary” tax return, a state “fiduciary” tax return, and federal and state income tax returns.
The fiduciary returns indicate that someone else is filing on behalf of the deceased taxpayer’s estate. The income tax returns reflect any income that the deceased person earned in the year he or she passed away.
Does California Have an Estate Tax?
Currently, California does not have an estate tax, death tax, inheritance tax, or gift tax. Prior to 2005, some estates did have to file California estate tax returns. Now, though, executors and administrators only need to handle paying federal estate taxes. If the deceased person had property in any other states, then an accountant in those states should be consulted about the need to pay any taxes there.
Are There Any Other California Tax Requirements?
If a probate proceeding is opened to administer an estate, the executor or personal representative must notify the California Franchise Tax Board of the proceeding. (Probate Code § 9202.) The notification should be made within 90 days after the court appoints the executor or personal representative to represent the estate.
Does the Executor or Personal Representative Have to Pay the Taxes?
When an executor or personal representative accepts responsibility for administering and managing an estate, he or she also accepts responsibility for paying the estate’s taxes. There is a chance that a representative who knows that taxes are due, but does not pay them, may become personally liable for the taxes, plus penalties and interest. The same is true if the representative does not complete due diligence about which taxes may be due. For this reason, representatives should seek professional tax and legal advice about their obligations. Doing so can help them assess which California taxes the estate owes.
Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.