Dedicated estate-planning and probate attorney Michael Smith, founder of Smith Barid, LLC, warns that families often face unexpected tax liabilities during probate due to overlooked income, capital gains, and state-level estate or inheritance taxes. For details, visit https://smithbarid.com
-- Esteemed probate lawyer Michael Smith is alerting families to the often-overlooked tax consequences that can arise during the probate process, warning that even well-intentioned heirs and executors can face costly surprises if estate taxes, income taxes, or property basis issues are mishandled.
For more information, please visit https://smithbarid.com
“When someone passes away, families are understandably focused on emotional and legal matters,” explained Smith. “But taxes don’t stop at death — and in many cases, what families don’t know can cost them thousands.”
According to Smith, one of the most common misconceptions about probate is that all estate assets transfer to heirs tax-free. “While inheritance itself is generally not taxable at the federal level, certain estate transactions can trigger tax liability,” he said. “For example, if the estate sells appreciated property before it’s distributed, or if retirement accounts are liquidated, those transactions can create income tax obligations for the estate or beneficiaries.”
Another common issue involves capital gains and the ‘step-up in basis’ — a tax adjustment that can eliminate appreciation on inherited property. “Families often make the mistake of selling an inherited home too soon or misreporting its value,” Smith explained. “Without accurate valuation and timing, they can lose the benefit of the step-up in basis and owe unnecessary capital gains tax.”
While the federal estate tax applies only to large estates, several states impose their own estate or inheritance taxes, which can catch families off guard. “States like Maryland, Pennsylvania, and Washington have tax rules that differ significantly from federal law,” said Smith. “Even a modest estate can be subject to these taxes if planning hasn’t been done in advance.”
Executors must also remember that the estate itself can owe income tax on earnings during administration — including rental income, dividends, or capital gains. “It’s not uncommon for estates to earn income while waiting for probate to close,” Smith added. “If those earnings aren’t reported correctly, the IRS can assess penalties and interest that reduce the heirs’ inheritance.”
Smith stressed that poor documentation is one of the biggest tax traps during probate. “Executors need to track every expense, income source, and asset value. Missing or inaccurate records can lead to double taxation or personal liability for the executor,” he cautioned. “We’ve seen cases where a family had to reopen probate years later because of IRS inquiries or state audits.”
To minimize risk, Smith recommends that families and executors work closely with both a probate attorney and a tax professional from the start. “Together, we can ensure assets are valued correctly, returns are filed on time, and the estate takes advantage of every deduction and exemption available,” he said. “Smart coordination can mean the difference between preserving wealth and losing it to unnecessary taxes.”
For families in the early stages of probate — or those preparing their estate plans — Smith emphasizes that tax awareness is a critical part of legacy protection. “Probate doesn’t have to be a financial burden,” Smith concluded. “But it does require careful attention to detail and proactive legal guidance.”
Source: http://RecommendedExperts.biz
Contact Info:
Name: Michael Smith
Email: Send Email
Organization: Smith Barid, LLC
Address: 7393 Hodgson Memorial Dr #202, Savannah, GA 31406, United States
Phone: (912) 352-3999
Website: https://smithbarid.com
Release ID: 89181980
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