By now, you’ve built your inventory and settled into the slower pace of the middle months. But while things feel quiet, tax deadlines are lining up in the background. Does the person’s final tax return cover everything, or does the trust need one of its own? Usually, the trust needs its own, and sometimes there is a third return to consider.

Form 1040: The final personal return

This return covers the person’s income from January 1 through the date of death and is due when their return would normally have been due. A surviving spouse can still file jointly for that year. Filing Form 56 lets the IRS know you are now acting on the person’s behalf, so notices come to you.

It is also worth looking back. We have seen it both ways: some people kept a copy of every tax return back to the 1970s, and others hadn’t filed in fifteen years. In one of those cases, by the time the back taxes were sorted out, everything the person owned went to the IRS, and nothing was left for the beneficiaries.

Someone has to fill in any gaps with the IRS and make sure everything owed is paid. If there is also an executor, that responsibility may fall to them, to you, or to both of you, and your attorney and CPA each play a part. Agree early on who is handling what.

Form 1041: The trust’s income tax return

Once the person passes, the trust becomes its own taxpayer, which is why you applied for an EIN in the first 30 days. Interest, dividends, rent, and asset sales after death belong on Form 1041, which is required if the trust has any taxable income or at least $600 in gross income, even if little or no tax is owed.

Here is the part that surprises most trustees: trusts reach the highest federal tax bracket at a much lower level of income than individuals do. Distributions can shift that tax to beneficiaries, who receive a Schedule K-1 showing what to report on their own returns. With good planning, that lowers the overall tax bill. Before you write a distribution check, talk with your CPA. Many fees, such as attorney, CPA, and trustee fees, are also deductible on the trust’s return, so keep track of them.

Selling assets and the step-up

Remember those values in your inventory? Many inherited assets receive a new tax basis equal to their value on the date of death, often called a “step-up in basis.” If the house or stock is sold later, any gain is measured from that value, not from what the person originally paid. That is why, when someone asks, “If we sell Mom’s house, do we owe tax?” the answer is often “not much.” The sale still has to be reported, so bring your CPA in before you list the house, not after it closes.

Retirement accounts are different. IRAs and 401(k)s usually pass directly to whoever is named on the account and don’t receive a step-up. Withdrawals from traditional accounts are taxed as income. A surviving spouse can usually roll the account into their own, but many other beneficiaries must empty an inherited account within ten years. If the person hadn’t yet taken their required withdrawal for the year they died, the beneficiary generally has to take it. And if the trust itself is the named beneficiary, things get complicated quickly, so ask your CPA early.

Form 706: The federal estate tax return

Form 706 addresses the transfer of wealth rather than income. For 2026, the exemption is $15 million per person, and it covers what a person gives away during their lifetime beyond the annual gift exclusion, plus what they leave at death, including assets outside the trust. Any taxable gifts reported on gift tax returns (Form 709) over the years are brought back into the calculation. Most families still won’t owe federal estate tax.

Even so, filing can benefit a surviving spouse. An election called “portability” preserves the deceased spouse’s unused exemption for the survivor to use later, and we see it missed simply because no one thought a return was needed. Form 706 is due nine months after death, with an extension available, so raise it early. If it was missed, it isn’t necessarily too late. When portability is the only reason to file, relief is generally available for up to five years after death.

A few other things to keep in mind

If you take a trustee fee, it is taxable income to you. Florida has no state income tax for individuals or trusts, no estate tax, and no inheritance tax. Property or residency in another state, however, may create additional filings. And everything above assumes the person has passed away. If you’ve stepped in while they’re still living, the tax rules work differently, so talk with your CPA before anything is filed.

Bills and beneficiaries don’t wait for tax season either. Ask your attorney before paying debts, pay everything from the trust account, and keep trust money and your own money completely separate. And give beneficiaries an occasional update, even when there isn’t much to report. In our experience, silence is what makes people nervous.

Most trustees only do this once, and you aren’t expected to know every form or deadline. But as that family with fifteen years of unfiled returns learned, what goes unaddressed doesn’t go away, and it can cost the beneficiaries everything. At Rehfeldt Group CPAs, we serve as your financial point guard, helping you understand which returns are needed, tracking deadlines, and working alongside your attorney so important details don’t get missed. If you’re not sure what needs to be filed, contact our team.