In California we have no inheritance tax. We used too many years ago but that went away when the federal government stopped the credit on it.
Now, in California you are going to have some tax consequences if you inherit property. You are either going to sell it and you are going to have capital gains on it back to the date of valuation or the date if death or you are going to rent it out and you have tax complications with doing so.
The decedent does have final tax returns that need to be filed depending on how much income the decedent received in the year of death.
With the sale of the property or renting out the property you are going to have estate or trust tax returns depending on if it is an estate or a trust there will be tax returns that need to be filed if income if income is $600 or more in the year.
If the estate does not do anything, the trust does not do anything in the year, does not have any interest or dividends and you are holding the property waiting to sell it, there is no filing requirements but you should take a look into that.
The difference in inheriting property through an estate, a trust or intestate where the person does not have a will or a trust is exactly the same to the recipient.
Depending upon what you inherit, there could be items which would be taxable when you sell which would always be items that are tax deferred like an IRA retirement type account.
For property you get the basis as of the date of death for the decedent then you go forward with that.
You need to make sure that you find every nuance of the law to apply it to your client in the best way possible to save them the most amounts of taxes.
There are black and white areas and grey areas. Some are black and white where you can’t do it and some are grey where you need to make sure you structure it where you can do it.
I have worked on plenty of tax returns that were prepared by others that are weekend warriors doing this profession during tax season or retired from the profession and they are not keeping up with their continuing education. Make sure you have somebody that is making sure they know what all the current laws are – especially with the major changes we have for tax year 2018.
For most people, it is a once or twice in a lifetime thing that they are doing. You are not doing this every day. You need to have a professional to guide you through and make sure that you have crossed every T and dotted every I.