When a loved one passes away, or when you are named trustee of a family trust, tax filings may not be the first thing on your mind. But estates and trusts often have their own tax obligations. Many executors and trustees turn to accountants in Louisiana for help understanding what needs to be filed and when.
This article explains, in plain language, how tax preparation generally works for estates and trusts. Rules are complex and can change, and Louisiana's legal system has its own terms and processes. Use this as a starting point, and work with a CPA and attorney on your specific situation.
Why Estates and Trusts Have Their Own Tax Filings
An estate or a trust can be treated as its own taxpayer. If it earns income, such as interest, dividends, rent, or gains from selling property, a separate return may be required.
Our firm offers "Integrated tax preparation and planning aligned with your wealth and legacy design." That includes returns for individuals, estates, and trusts.
Key Terms to Know
Decedent: The person who has passed away.
Succession: In Louisiana, the legal process of settling a person's estate is called a succession.
Executor or administrator: The person responsible for handling the estate. Louisiana law may use other titles.
Trustee: The person or institution that manages a trust.
Beneficiary: A person or organization that receives property or income.
Fiduciary return: A tax return filed for an estate or trust.
Returns That May Be Needed After Someone Passes Away
The Final Individual Return
The decedent's final federal individual return generally covers income from January 1 through the date of death. The executor or a surviving spouse typically handles it. A Louisiana return may also be required.
The Estate's Income Tax Return
After death, income from the decedent's assets may be reported by the estate. If the estate has enough income, a federal fiduciary income tax return may be required. Check current IRS guidance for the filing threshold. Louisiana has its own fiduciary return.
The Federal Estate Tax Return
A federal estate tax return is generally required only for larger estates above an exemption amount that changes over time. In some cases, a return may be filed even when no tax is owed, for example to preserve certain elections for a surviving spouse. Louisiana does not currently impose a separate state estate tax, but rules can change.
How Trust Taxes Generally Work
Grantor vs. Non-Grantor Trusts
For a grantor trust, income is generally reported on the creator's own return. Many revocable living trusts fall into this group while the creator is alive. A non-grantor trust is generally its own taxpayer and may file its own return.
Distributions and K-1s
When a trust or estate distributes income to beneficiaries, part of the tax responsibility may pass to them. Beneficiaries typically receive a Schedule K-1 showing what to report on their own returns.
Compressed Tax Brackets
Trusts and estates can reach the highest federal tax rate at much lower income levels than individuals. That is one reason the timing of distributions can matter.
Common Challenges for Executors and Trustees
Finding records: Gathering statements, prior returns, and account information can take time.
Valuing assets: The value of assets at the date of death often affects future cost basis.
Choosing a tax year: Estates may have options for their tax year. Trusts generally use a calendar year.
Timing distributions: Distribution decisions can shift taxes between the estate or trust and beneficiaries.
Coordinating with attorneys: Legal steps in the succession and tax filings often overlap.
How Accountants in Louisiana Can Help
Executors and trustees often work with both an attorney and a CPA. The attorney handles legal matters, while the CPA focuses on tax returns and planning. A CPA can help:
Identify which returns may be required.
Track income and expenses for the estate or trust.
Prepare K-1s for beneficiaries.
Plan the timing of distributions.
Keep organized records. Our accounting services are described as "Structured accounting that brings clarity, order, and rhythm to your financial foundation."
Our firm also offers estate planning coordination, described as "Collaboration with estate planning professionals to help ensure legacy strategies align with your full financial structure."
Planning Ahead for Your Own Estate
If handling a loved one's estate has you thinking about your own plan, you are not alone. Reviewing your estate documents, beneficiary designations, and how accounts are titled can make things easier for your family later. Families Seeking Integration is one of the groups our firm serves: "Those wanting unified financial design across disciplines."
Who Morella & Morella Serves
Morella & Morella serves "individuals and families whose financial lives have grown in complexity alongside their success," including:
Precision-Driven Professionals: Physicians, attorneys, and highly trained professionals.
Builders of Enterprise and Opportunity: Founders, partners, and business owners.
Families Seeking Integration: Those wanting unified financial design across disciplines.
Our office is located at 2901 Johnston Street, Suite 401, Lafayette, LA 70503. Visit our home page or see our full list of services.
Get Help With Estate and Trust Taxes
If you are serving as an executor or trustee and have questions about tax filings, Contact Us to get started, or learn about our unique service models.
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Frequently Asked Questions
Does an estate have to file a tax return in Louisiana?
It depends on the estate's income and circumstances. The decedent's final individual return and an estate income tax return may be needed. Louisiana has its own fiduciary return. Check current guidance.
Does Louisiana have an estate tax or inheritance tax?
Louisiana does not currently impose a separate state estate tax. A federal estate tax may apply to larger estates. Rules can change.
Who is responsible for filing a deceased person's final tax return?
Generally the executor or administrator, or a surviving spouse filing jointly. A CPA can help.
How are trusts taxed?
Grantor trusts are generally taxed to the creator. Non-grantor trusts generally file their own returns, and beneficiaries may report income passed to them on a K-1.
What is a K-1 from a trust or estate?
A Schedule K-1 shows a beneficiary's share of income, deductions, and credits from the trust or estate to report on their own return.
Do I need an accountant to settle an estate in Louisiana?
It is not always required, but many executors work with a CPA for tax filings and an attorney for the succession process.
Disclosure: This material is for informational and educational purposes only and does not constitute legal, tax, or investment advice. Please consult appropriate professionals before making decisions. Tax laws are complex and subject to change, and the information provided may not apply to your specific situation. There is no guarantee that any strategy will achieve its objectives. Investing involves risk, including the possible loss of principal. Morella & Morella, LLC ("M&M") is a certified public accounting firm registered with the Louisiana State Board of Certified Public Accountants. Apex Capital Management, LLC ("Apex") with offices in Lafayette, Baton Rouge and Youngsville, Louisiana, is a registered investment advisor registered with the U.S. Securities and Exchange Commission (SEC File No. 117059) and notice-filed in Louisiana and Texas. Registration does not imply a certain level of skill or training. M&M and Apex are affiliated through common ownership but are separate and distinct legal entities. Accounting, tax, attest, and related professional services are provided solely by Morella & Morella, LLC. Investment advisory services are provided solely by Apex Capital Management, LLC. The affiliation between the firms does not make one entity responsible for the services, advice, or obligations of the other.
