Feb42026
Probate Q&A Series

Do I need to file a final income tax return for my deceased grandparent if there wasn’t enough taxable income? – North Carolina

Short Answer

In North Carolina, a final state income tax return is generally required only if the deceased person’s gross income for the year (through the date of death) exceeds the filing threshold tied to the standard deduction. If the grandparent was not required to file while living, the personal representative usually does not have to file a final North Carolina return just because the person died. However, a return is often filed anyway when taxes were withheld (for example, from an annuity payout) because filing may be the only way to claim a refund.

Understanding the Problem

In a North Carolina estate administration near the final accounting and closing stage, the key question is whether the personal representative must file a deceased grandparent’s final income tax return when the grandparent did not have enough taxable income. The decision often turns on whether the grandparent had enough gross income to trigger a filing requirement and whether any income or withholding was reported under the grandparent’s Social Security number around the time of death. Confusion commonly comes up when an annuity payment is processed near death, taxes are withheld, and the funds are deposited after death.

Apply the Law

North Carolina’s individual filing rule generally tracks federal concepts of “gross income” and uses a filing threshold tied to the standard deduction. If the deceased individual would have been required to file an income tax return for that tax year while living, the estate’s personal representative must file the return in the decedent’s name. Separately, an estate may have its own filing requirement for fiduciary income tax if the estate has taxable income and is required to file a federal fiduciary return.

Key Requirements

  • Was the decedent required to file while living?: The main trigger is whether the decedent’s gross income for the year exceeds the filing threshold (which is tied to the standard deduction).
  • Who files if a return is required?: The court-appointed personal representative (executor/administrator) files the decedent’s final return in the decedent’s name.
  • Is there separate “estate income” after death?: Income received after death may belong on an estate fiduciary return (not the decedent’s final return), depending on how the payment is characterized and reported.

What the Statutes Say

Analysis

Apply the Rule to the Facts: Here, the estates are close to closing, and the uncertainty centers on an annuity payout processed around the time of death with withholding and a post-death deposit. Under North Carolina’s rule, the first step is to determine whether each grandparent’s gross income for the year up to the date of death exceeded the filing threshold tied to the standard deduction. If the grandparent was not required to file, a final return may still be worth filing if withholding occurred under the grandparent’s Social Security number, because filing is commonly how a refund is requested. If the annuity payment is reported as post-death estate income, that may point to an estate fiduciary return instead of (or in addition to) the decedent’s final return.

Process & Timing

  1. Who files: The court-appointed personal representative. Where: North Carolina Department of Revenue for the state return; IRS for the federal return. What: Typically a final individual return (North Carolina Form D-400 and the federal Form 1040) if a filing is required or a refund is being claimed; and, if the estate has a separate filing obligation, a fiduciary return (North Carolina Form D-407 and federal Form 1041). When: Generally by the normal tax deadline for the year, unless an extension is obtained.
  2. Sort the annuity reporting: Compare the year-end tax forms (for example, a 1099) to see whether the income and withholding were reported under the decedent’s Social Security number or under the estate’s taxpayer identification number. That reporting often drives whether the item belongs on the final individual return or the fiduciary return.
  3. Closeout step: Before final distribution and closing, confirm that required returns are filed (or documented as not required) and that any refunds due are addressed so the final accounting matches the tax filings.

Exceptions & Pitfalls

  • Withholding can change the practical answer: Even when income is below the filing threshold, withholding from a pension/annuity can make filing advisable because a refund usually requires a filed return.
  • Mixing “final return” vs. “estate return”: Income earned before death generally belongs on the decedent’s final return; income received after death may belong on the estate’s fiduciary return. The deposit date alone does not always control.
  • Distributions can trigger fiduciary filing: In many administrations, once the estate makes distributions during a tax year, fiduciary return filing becomes more likely even if the dollar amounts seem small, because the return is used to report and allocate income items.
  • Missing tax forms: Annuities and retirement accounts often issue tax forms after year-end. Closing an estate too early without collecting those forms can create a mismatch between the final accounting and later-reported income/withholding.

Conclusion

Under North Carolina law, a final income tax return for a deceased grandparent is generally required only if the grandparent’s gross income for the year (through the date of death) exceeded the filing threshold tied to the standard deduction, and the personal representative files if the decedent was required to file. Even when income is low, withholding from an annuity or similar payment can make filing important to claim a refund. The next step is to confirm how the annuity was reported and file the appropriate return(s) by the normal annual tax deadline (or timely request an extension).

Talk to a Probate Attorney

If an estate is close to closing and there is uncertainty about a final return versus an estate fiduciary return (especially with an annuity payout and withholding around the date of death), our firm has experienced attorneys who can help clarify what must be filed and what deadlines apply. 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: 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.