Who Pays Property Taxes During Probate?

Probate is the court-supervised process of validating a will, gathering a deceased person’s assets, paying their debts, and distributing the remaining property. When a property owner passes away, the obligation to pay property taxes does not disappear. These taxes continue to accrue against the property, becoming a debt that must be addressed during the administration of the estate.

The Estate’s Responsibility for Property Taxes

When an individual passes away, their assets are collected into a legal entity known as the estate. The estate is responsible for settling the decedent’s debts, including any property taxes that are due. Funds for these payments come from the estate’s assets, like bank accounts or proceeds from selling other property, and are paid before any assets are distributed to beneficiaries.

The person tasked with managing this process is the executor or personal representative, named in the will or appointed by a probate court. The executor has a legal duty to manage the estate’s finances, which includes ensuring all tax obligations are paid on time. This responsibility continues as long as the property remains within the estate during probate.

While property taxes are a high-priority debt, they are paid after certain other estate obligations, such as funeral expenses and administration costs. However, they take precedence over most other creditors. The executor must ensure these tax liabilities are satisfied to prevent financial penalties, as failure to do so can create complications and potentially hold them personally responsible for penalties.

Property Tax Reassessment Upon Death

The death of a property owner is often considered a “change in ownership” by local tax authorities, which can trigger a reassessment of the property’s value. If a reassessment occurs, the property’s taxable value is adjusted to its current fair market value. This can lead to a significant increase in the annual property tax bill, especially if the deceased owned the property for a long time and had a low assessed value.

However, many jurisdictions offer exemptions that prevent this reassessment, with the most common being for transfers between parents and children or grandparents and grandchildren. These provisions can allow an heir to inherit the deceased’s lower tax base, but the rules vary significantly by state and county.

These exemptions are not automatic. In many areas, to qualify for the tax benefit on a primary home, the heir who inherits the property must use it as their principal residence. Some states have also narrowed the rules, limiting the types and value of property that can be transferred without reassessment.

Notifying the Tax Assessor

The executor must formally notify the local county assessor’s office of the change in ownership after a property owner’s death. This notification is done by filing a specific form to ensure county records are accurate and to determine if a reassessment is warranted. Claiming an exclusion requires filing the correct forms within a set deadline.

To complete this form, the executor will need the deceased owner’s full name and date of death, the property’s legal description and Assessor’s Parcel Number (APN), and the names of the new owners and their relationship to the decedent. This information is necessary for determining eligibility for any reassessment exclusions. These forms are generally available on the website of the county assessor or tax collector.

Consequences of Non-Payment

Failing to pay property taxes during probate has direct and escalating financial consequences. The immediate effect is the accrual of penalties and interest on the unpaid balance, which increases the total amount owed by the estate. These charges diminish the assets available for beneficiaries.

An unpaid property tax bill becomes a lien against the property. This tax lien holds a high-priority status, meaning it takes precedence over most other claims, including mortgages. The lien must be fully satisfied before the property can be legally sold or have its title transferred to the heirs, which can halt the estate’s distribution.

If property taxes remain delinquent for an extended period, the county or taxing authority can initiate a tax sale of the property. In a tax sale, the county forecloses and sells it at a public auction to recover the owed taxes, penalties, and costs. Any remaining proceeds from the sale are returned to the estate.