Not Contacting a Tax Advisor to Determine If There Are Any Possible Income Tax Savings by Properly Planning for Taxes and Change of Ownership Forms
Why This Mistake Happens
Taxes are rarely the first thing on anyone’s mind after losing a loved one, and understandably so. But overlooking tax planning early in the estate process can lead to missed savings—or worse, unexpected financial burdens.
Many people assume that taxes will simply “work themselves out” as the estate is settled. Others believe they can handle things later, without realizing that certain tax-saving opportunities have deadlines. Unfortunately, waiting too long or failing to consult an expert can result in unnecessary penalties, higher tax liabilities, and lost opportunities to preserve more of the estate’s value for heirs.
How Tax Mistakes Can Cost the Estate
Estate taxes and property ownership transfers can be surprisingly complex. Here’s what can happen if tax planning is neglected:
- Missed Tax Deductions – Some estate expenses, such as legal fees, property taxes, and charitable donations, may be deductible. Failing to track these properly can mean paying more in taxes than necessary.
- Capital Gains Surprises – If real estate or investments are transferred incorrectly, heirs may owe capital gains taxes on appreciated assets. Proper structuring can help reduce or eliminate this tax burden.
- Penalties for Late Filings – The estate may be required to file income tax returns for the deceased and/or the estate itself. Missing deadlines could mean hefty IRS penalties and interest.
- Incorrect Ownership Transfers – Some properties require change of ownership forms to be filed promptly to avoid reassessment, especially in states with property tax caps. Failing to do this could cause a significant jump in property taxes for heirs.
The bottom line? Taxes don’t wait, and what you don’t know can cost the estate.
Smart Steps to Avoid Costly Tax Mistakes
Tax planning doesn’t have to be overwhelming. Here’s how to stay ahead of potential issues:
✅ Meet with a Tax Advisor Early – Consulting an estate tax professional can help identify savings opportunities before key deadlines pass.
✅ Understand Step-Up in Basis Rules – If the estate includes real estate or investments, knowing how step-up in basis rules apply can save heirs thousands in capital gains taxes.
✅ File the Right Tax Returns on Time – The estate may need to file multiple tax returns, including the deceased’s final personal tax return, estate income tax returns, or even a federal estate tax return (Form 706) if applicable.
✅ Review Property Tax Reassessment Rules – Some states allow heirs to inherit a property without tax increases if forms are filed promptly.
✅ Consider Trusts and Other Tax-Saving Strategies – If the estate is large or complex, trust structures may help minimize tax burdens.
✅ Don’t Forget About State Tax Laws – Some states have their own inheritance or estate taxes, even if federal taxes don’t apply. Knowing the rules can prevent costly surprises.
A Smarter Way to Handle This
In A Nutshell . . .
Taxes are complicated enough in everyday life—add in an estate, and they can become overwhelming. But the good news is, you don’t have to figure it all out on your own.
A knowledgeable tax advisor can help you avoid unnecessary costs, file the right documents, and ensure the estate is handled in the most tax-efficient way possible. If you’re not sure where to begin, let’s talk. I can help connect you with trusted professionals who can guide you through this process, so you don’t leave money on the table—or face unexpected tax bills later.