Jan52026
Probate Q&A Series

Do I need any income or estate tax returns if there’s a retirement account with no beneficiary and withholdings? – North Carolina

Short Answer

In North Carolina, a retirement account with no living beneficiary typically becomes a probate estate asset, and distributions from that account are usually taxable income when received. That often means at least one income tax return may be needed (the decedent’s final return and/or an estate fiduciary return), especially if tax was withheld or the estate received taxable distributions. North Carolina does not have a state estate tax for deaths after January 1, 2013, but a personal representative still needs to address tax clearance issues before the Clerk of Superior Court will allow a final account.

Understanding the Problem

Under North Carolina probate administration, the question is whether a personal representative must file income tax returns or estate tax returns when a decedent’s retirement account has no beneficiary designation (or no surviving beneficiary) and the plan administrator withheld taxes from a distribution. The decision point is whether the retirement account proceeds are treated as probate estate property and whether those proceeds create taxable income that triggers required filings before the estate can close through the Clerk of Superior Court.

Apply the Law

In North Carolina, if a payable-on-death or beneficiary designation fails because no beneficiary survives, the asset generally belongs to the decedent’s estate and is handled through the estate administration. Retirement plan and traditional IRA distributions are commonly treated as taxable income when paid out (with limited exceptions for any after-tax basis). If the estate has taxable income and federal law requires a fiduciary income tax return, North Carolina generally requires a corresponding North Carolina fiduciary income tax return. Separately, North Carolina’s state estate tax was repealed for deaths after January 1, 2013, but the Clerk of Superior Court typically will not allow a final account unless the fiduciary shows required taxes have been addressed.

Key Requirements

  • Determine whether the retirement account is a probate asset: If no beneficiary survives (or the beneficiary designation is ineffective), the account proceeds generally become part of the estate and flow through the personal representative’s accounting.
  • Identify who received the taxable distribution: If the estate received the distribution, the estate may have taxable income; if an individual received it directly, that person may have the income instead.
  • Confirm whether taxable income triggers required returns: If the estate has taxable income and is required to file a federal fiduciary return, North Carolina generally requires a state fiduciary return as well.

What the Statutes Say

Analysis

Apply the Rule to the Facts: The probate is already in the accounting stage and aims to close on time, so tax-related loose ends can delay the final account if they are not handled. If the retirement account had no beneficiary (or no surviving beneficiary), the proceeds commonly become an estate asset that must be inventoried and accounted for, and distributions from a traditional retirement account are commonly taxable income when received. If taxes were withheld from a distribution, that usually signals a taxable distribution occurred and that a return may be needed to report it and claim the withholding credit. The small creditor claim and vehicle transfers do not usually change whether income tax filings are required, but they can affect the timing and documentation needed to close.

Process & Timing

  1. Who files: The personal representative. Where: North Carolina Clerk of Superior Court for the estate accounting, and the North Carolina Department of Revenue and IRS for tax filings. What: Gather the retirement plan’s year-of-death and estate-year tax forms (commonly a Form 1099-R showing gross distribution and withholding) and confirm whether the distribution was paid to the estate or to an individual. When: Before submitting the final account for approval, because tax clearance issues can prevent allowance of the final account.
  2. Determine the correct income tax returns: (a) the decedent’s final individual income tax return for the year of death (if required under federal rules), and (b) an estate fiduciary income tax return for any year the estate received taxable income (if required). North Carolina generally tracks the federal filing trigger for the estate fiduciary return.
  3. Close the estate with tax issues addressed: The final account should reflect that taxes that became payable have been paid (or otherwise secured if applicable) so the Clerk can allow the final account and the estate can close.

Exceptions & Pitfalls

  • Withholding does not always mean the estate owes tax, but it often means a return is needed: If tax was withheld, a return is commonly required to report the distribution and claim the withholding credit, even if the final tax due is low or zero.
  • Who received the distribution matters: If the retirement account paid directly to an individual (even if the estate later receives the money), the taxable income may belong to that individual rather than the estate. The payee shown on the tax form is a key detail.
  • “No beneficiary” can create probate administration work: When the beneficiary designation fails, the personal representative may need estate documentation (letters, EIN, and plan paperwork) to collect the account, and delays can affect the estate’s accounting timeline.
  • Do not treat this as “estate tax” by default: North Carolina’s state estate tax has been repealed for deaths after January 1, 2013, but federal estate tax can still apply in some situations. A tax attorney or CPA should confirm whether any federal estate tax return is required.
  • Final account approval can hinge on taxes: Even when there is only one small creditor claim and simple transfers, the Clerk can require the accounting to show that required taxes have been handled before allowing the final account.

Conclusion

In North Carolina, if a retirement account has no surviving beneficiary, it commonly becomes an estate asset, and distributions from that account are usually taxable income when received. As a result, the personal representative may need to file the decedent’s final income tax return and/or an estate fiduciary income tax return, especially when the plan withheld taxes. North Carolina does not impose a state estate tax for deaths after January 1, 2013, but the next step is to confirm the payee and withholding on the retirement distribution and file any required income tax returns before submitting the final account for allowance.

Talk to a Probate Attorney

If there is a retirement account with no beneficiary and tax withholdings during a North Carolina estate administration, our firm has experienced attorneys who can help clarify what must be reported, what can delay the final account, and what to do next. Call us today at (919) 341-7055.

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: jpierce

Attorney Jared Pierce is the founder of Pierce Law Group in Raleigh, North Carolina, a firm he established with a dedicated focus on probate administration and estate planning across North Carolina. Born and raised in the Republic of South Africa, Jared moved to Durham with his family in 2001, bringing with him a rich cultural background and a distinctive accent that often serves as a conversation starter.