Some estates you can handle with software alone. Others need a CPA from day one. This guide draws the line — and explains what to look for in an estate accounting specialist.
Many estates can be administered by a capable executor using purpose-built software without professional accounting help. Others require a CPA from the first week. Knowing which situation you're in can save significant fees — or prevent significant mistakes.
The estate is relatively simple: one or two bank accounts, a house, some personal property, and a straightforward will. The decedent had ordinary W-2 income and no business interests. The estate value is well below the federal estate tax exemption. There are no disputes among beneficiaries. The executor is organized and comfortable with financial record-keeping.
The decedent owned a business, had partnership interests, or was a shareholder in an S corporation. The estate may be subject to federal or state estate taxes. The decedent had complex investment holdings: rental properties, foreign accounts, trusts within trusts, or annuities. There are back taxes owed or unfiled returns. The estate will remain open for more than a year. There are disputes among beneficiaries that may result in court accountings.
An estate CPA helps with: preparing the decedent's final individual income tax return (Form 1040), preparing the estate income tax return (Form 1041) for each year the estate is open, valuing assets for estate tax purposes, filing the federal estate tax return (Form 706) if required, advising on the tax consequences of asset distributions, and representing the estate before the IRS if there's an audit.
Not all CPAs have estate experience. Look for someone with specific experience in fiduciary income taxes (Form 1041) and, if relevant, estate taxes (Form 706). The American Institute of CPAs offers a Personal Financial Specialist (PFS) credential for CPAs with estate planning expertise. Local estate attorneys can often recommend CPAs they've worked with.
CPA fees for estate administration typically range from $1,500 for a simple final return to $15,000+ for a complex estate with business interests. You can manage costs by doing your own bookkeeping (using estate accounting software to track all transactions and generate organized reports) and presenting the CPA with clean, categorized records rather than a shoebox of receipts.
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