Feb42026
Probate Q&A Series

Can the estate pay for a CPA to prepare the decedent’s final tax return and the estate’s income tax return related to investment sales? – North Carolina

Short Answer

Yes. In North Carolina, a personal representative (executor) can generally use estate funds to hire and pay a CPA to prepare the decedent’s final income tax returns and the estate’s fiduciary income tax returns, including returns that report investment sales during administration. The key is that the CPA work must be a reasonable administration expense and properly documented in the estate accounting filed with the Clerk of Superior Court.

Understanding the Problem

In a North Carolina estate administration, can an executor use estate funds to pay a CPA to prepare (1) the decedent’s final income tax return and (2) the estate’s fiduciary income tax return when the estate sold investments and is now in the court accounting phase while waiting on tax forms and final filings?

Apply the Law

North Carolina treats an estate as a separate taxpayer during administration, and the personal representative is responsible for handling required tax filings and payments. Because tax compliance is part of administering and closing an estate, hiring professional help (like a CPA) is commonly treated as an administration expense—so long as the expense is reasonable, tied to estate administration, and supported by records for the court accounting. North Carolina also requires tax issues to be addressed before the Clerk can allow a final fiduciary account in many situations, which is one reason tax preparation often becomes a necessary estate expense.

Key Requirements

  • Estate purpose: The CPA work must relate to administering the decedent’s affairs or the estate (for example, preparing the final individual return and the estate’s fiduciary return reporting estate income and investment sales).
  • Reasonableness: The fee should be reasonable for the complexity of the returns (multiple brokerage accounts, stepped-up basis issues, K-1s, and 1099 reporting often justify professional preparation).
  • Good records for the accounting: The executor should keep engagement letters, invoices, and proof of payment so the disbursement can be shown and supported in the estate accounting filed with the Clerk of Superior Court.

What the Statutes Say

Analysis

Apply the Rule to the Facts: The estate includes investment accounts that were liquidated during administration, which commonly creates taxable reporting (basis, gains/losses, and year-end tax forms). Preparing the decedent’s final income tax return and the estate’s fiduciary income tax return is part of the executor’s job to get the estate ready to close. Paying a CPA from estate funds typically fits as an administration expense when the CPA’s work is limited to estate-related filings and the executor keeps invoices and proof of payment for the court accounting.

Because the estate is in the court accounting phase and waiting on tax forms, the timing also fits normal administration: brokerage 1099s and other tax documents often arrive after year-end, and final acceptance/processing by taxing authorities can delay closing. That delay does not usually make the CPA fee improper; it often shows why professional help is needed to finish the accounting and close the estate cleanly.

Process & Timing

  1. Who files: The personal representative (often through a CPA). Where: Tax returns are filed with the IRS and the North Carolina Department of Revenue; the related expense is reported in the estate accounting filed with the Clerk of Superior Court (Estates Division) in the county where the estate is pending. What: Typically the decedent’s final Form 1040 (and NC individual return if required) and the estate’s fiduciary returns (typically Form 1041 and a North Carolina fiduciary return when required). When: Generally by the normal tax deadlines for the applicable tax year, with extensions if appropriate.
  2. Document the expense: Keep the CPA engagement letter, itemized invoice(s), and canceled check/bank proof showing payment from the estate account. In the accounting, list the CPA payment as a disbursement and attach the supporting voucher if the Clerk requires it for that filing.
  3. Close after tax compliance: Once required taxes are handled and the accounting is otherwise complete, the executor can move toward approval of the final account and discharge, subject to the Clerk’s review and any required tax clearance steps.

Exceptions & Pitfalls

  • Mixing personal and estate work: If a CPA invoice bundles the executor’s personal tax work with estate work, the estate should generally pay only the estate-related portion, with the bill clearly separated.
  • Unclear scope of services: A vague invoice (“tax services”) can create problems in the court accounting. Itemized billing that ties work to the decedent’s final return and the estate fiduciary return helps.
  • Distributions before tax picture is clear: Large distributions before understanding capital gains from investment sales can create cash-flow issues for taxes and expenses. Coordination between the CPA and the estate administration timeline helps avoid that trap.

Conclusion

Yes—an executor in North Carolina can generally pay a CPA from estate funds to prepare the decedent’s final income tax return and the estate’s fiduciary income tax return, including reporting investment sales during administration, as a reasonable estate administration expense. The practical key is documentation: keep a clear invoice and proof of payment and report the CPA fee in the estate accounting filed with the Clerk of Superior Court. As the estate moves toward closing, tax filings and any required tax payment/clearance steps should be completed before the final account is submitted.

Talk to a Probate Attorney

If an estate is waiting on brokerage tax forms, reporting investment sales, and trying to finish the court accounting, our firm has experienced attorneys who can help clarify what expenses can be paid, how to document them, and how to keep the administration on track. Call us today at [CONTACT NUMBER].

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.

Category: Probate Q&A Series

Author: Pierce Law

Pierce Law Group is a North Carolina law firm focused on probate administration, real estate partition matters, and surplus funds claims across North Carolina. We know these situations often come with stress, family dynamics, and time-sensitive decisions—so we prioritize clear communication, steady guidance, and a practical plan from day one. Our goal is to make a complicated process feel manageable, while protecting what matters most to you.