An executor for a Brooklyn estate recently sat in my office, looking at a list of expenses. He had dutifully paid the decedent’s final bills, hired an appraiser for the property, and engaged our firm to guide the estate through Surrogate’s Court. His question was simple: “All these legal fees—is there any way to get a tax deduction for them?”
It’s a question I hear often, and the answer reveals a fundamental principle of estate administration. The simple answer is yes, probate attorney fees are often deductible. But the crucial detail is who gets to take the deduction. It is the estate itself—not the executor personally, and not the beneficiaries.
An Expense of the Estate, Not the Individual
When a person passes away, their assets form an estate, which is treated as a separate taxable entity. The executor or administrator has a fiduciary duty to manage this entity. This includes paying for necessary administrative costs, and the attorney’s fees for probating the will and settling the estate are a primary example.
Prior to the Tax Cuts and Jobs Act of 2017, individuals could sometimes deduct certain legal fees as a miscellaneous itemized deduction. That is no longer the case for most personal legal matters. The rules for estates, however, are different. The costs of administration are not personal expenses of an heir; they are necessary expenditures for the proper stewardship of the decedent’s assets. Think of the estate as a temporary business that needs to be wound down. The legal fees are an ordinary and necessary cost of that process.
These fees are deductible by the estate on its own tax filings, reducing either its income tax or its estate tax liability. This, in turn, can increase the total amount of assets left for the beneficiaries to inherit.
How and Where the Estate Takes the Deduction
An executor has a choice. The attorney’s fees and other administration costs can typically be deducted in one of two places:
- The Estate Tax Return (Form 706): If the estate is large enough to be subject to federal or New York estate tax, deducting administrative fees from the gross estate value can significantly reduce or eliminate the tax owed. While the federal exemption is over $13 million per person in 2024, the New York State exemption is much lower—$6.94 million as of 2024. Many more estates in New York will face a state estate tax than a federal one, making this deduction highly relevant.
- The Estate Income Tax Return (Form 1041): An estate may also earn income after the decedent’s death—from investments, rental property, or the sale of an asset. The estate must file an income tax return for this income. Attorney’s fees can be used to offset this income, lowering the tax bill.
The executor must make a deliberate choice—the fees cannot be deducted on both returns. In cases where no estate tax is due, the decision is simple: take the deduction on the income tax return. If estate tax is a factor, we must analyze which choice provides the greater tax savings for the estate and its beneficiaries.
The Standard for a Deductible Fee
Not every legal fee paid during this period qualifies. The IRS requires that the expense be “actually and necessarily incurred in the administration of the decedent’s estate.” This means the legal work must be directly related to settling the estate—such as probating the will, collecting assets, paying creditors, defending the estate against claims, and distributing the assets to the rightful heirs.
In New York, the Surrogate’s Court plays a role in validating this. The court must approve an attorney’s fees, ensuring they are reasonable for the work performed to settle the estate. This process, governed by provisions like Surrogate’s Court Procedure Act (SCPA) § 2110, inherently aligns with the IRS standard of a “necessary” administrative expense.
If, however, an attorney performs work that is primarily for the personal benefit of a beneficiary—for example, mediating a dispute between two siblings over who gets the family silver—that portion of the fee may not be deductible by the estate. The work must serve the estate as a whole.
The role of an executor is one of careful stewardship. Managing the estate’s obligations, including its taxes, is a core part of that fiduciary duty. If you are serving as an executor and are beginning to assemble the financial picture of the estate, our firm can conduct a fiduciary review to identify and properly categorize all administrative expenses for the estate’s tax returns.
