Stimulus Payment to Dead Person

As folks here may have heard, the IRS is sending checks to deceased individuals. I checked the IRS "Get My Payment" site for the decedent. The IRS states that it is sending a check on April 24 to the decedent at my address. (I used my address on the deceased's final tax return, for tax year 2019.) The check will be for $1200.
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) states that an "eligible individual" does not include an estate. As interested, see
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. A number of web sites indicate that the IRS's mailing of a $1200 (or more) stimulus check to a deceased individual is legally not the same as mailing the check to the estate. These sites also point out that the CARES Act has no "clawback" provision. Mistakes the IRS makes in sending out checks, that are in favor of the taxpayer dollar-wise, cannot be corrected. Is is said that the point of the legislation was to get money into people's hands as quickly as possible, regardless of how slipshod the printing and distribution of money to taxpayers may appear to be.
One could argue that the money being sent to deceased individuals goes to the devisees of the estate and so is still accomplishing its purpose of stimulating the economy. In this instance, the devisee is a large, well-known charity.
Questions: 1. Right now, I plan to go to the bank where the estate account (now closed) was. I will bring my court appointment papers, death certificate, and the short, applicable statute sections. I will see if the bank will let me sign the check over to the bank and then write a money order to either me or the charity. If the bank hems and haws, I will ask if the bank would be willing to open another estate account.
2. Is there a hazard that the IRS will try to clawback this money?
Reply to
Elle Honda.Lioness

The bank might go along with that. Or if there is a "small estate" procedure in your state, you might be able to use that as well.
Even when not explicit, common law allows for mistakes to be remedied when appropriate. What the IRS may actually do is another story, but from a legal standpoint there is that risk. So if you are able to cash the check, I would hold it in your account long enough to be sure the IRS won't try to take it back.
Reply to
Stuart O. Bronstein
I'm in a similar situation, executor of an estate for a decedent who died in July 2019. We filed a final return and got a refund into the estate account which is still open.
Will advise if money arrives and/or leaves.
Reply to
John Levine
Thank you for the input, Stu and John. It helps in my decision-making.
For the archives: The $1200 stimulus check arrived. It is made out as follows (names and address changed):
JONA SMITH DECD JEAN JONES PER REP 1234 Main Street Anytown, XY 67890
Somehow after a long several months dealing with a dozen or so financial institutions, shaking the deceased's assets free of their hands, I am finding this a bit amusing.
I see that these stimulus payments are tax-free.
I have written the charity to see if I can just sign the check over to it after an appropriate waiting period, as Stu suggested.
Take care all.
Reply to
Elle Honda.Lioness
The CARES act very explicitly excludes an "estate or trust" from qualifying for the payment. A few sentences after excluding estates, the CARES act states "Any failure to so reduce the credit shall be treated as arising out of a mathematical or clerical error and assessed according to section 6213(b)(1)." The possibility that the IRS will want the $1200 back is there. Whether they will bother to claw back the money is unknowable. If you endorse the check and the IRS wants the money back, they will come after you and not the charity that you forward the money to.
Many banks will treat a check made out to JONA SMITH DECD, JEAN JONES PER REP as a check made out to Jean Jones and will let it be deposited into her personal checking account. Since the check shows two names and explicitly indicates one is known to be deceased this seems reasonable.
If I were in your position I would try to keep things simple and safe: 1) Deposit the check into my personal checking account. 2) Do nothing else until I see convincing guidance from the IRS stating the money will not be clawed back. 3) Set a note in my Calendar for November 1, 2023 tasking me to revisit the situation. If the money hasn't been clawed back and there is a no longer a reasonable possibility it will be, I would make a $1200 donation "in Memory of Jona Smith" to the specified charity.
Reply to
BignTall
The above quotation is a few lines down from the sentence excluding estates, but it is also in a very different section, on a different topic as far as I can tell.
The media has been quoting tax and legal experts right and left on the issue of stimulus checks being sent to deceased individuals and whether they have to be returned. None have cited the sentence you cited above. But it's clear to me that the issue is not resolved.
I agree. The IRS has been asked about this and is so far silent. I expect there will be clarification within two months. Members of Congress are aware of this. E.g. Senator Kirsten Gillibrand has called for the Justice Dept to investigate the checks/deposits going to dead people. As interested, see
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Thank you for the suggestion about possibly depositing the check into my personal account. I hope to avoid this. It's commingling yada and frowned upon, as you probably know. Time will tell whether it is necessary. I may be stuck with opening a new estate account. No big deal other than I wanted to be done.
Reply to
Elle Honda.Lioness
There is a good chance the IRS will want the money. If you cash the check, they will also want interest. The check is good for a year. I'd hold it and wait to see how things play out. The uncashed check can be returned with no interest accruing.
Reply to
paultry
Thank you for this information, paultry.
Senator Gillibrand did not say what I posted she said or what justthenews.com headlined her as saying. Her exact statement was: ?So I don't think it would be handled any more differently than that and we should actively, of course, encourage the Department of Justice to investigate any instances of tax fraud.?
Here's the interview:
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Today I am thinking it's more likely than not the IRS will ask for the money back.
Reply to
Elle Honda.Lioness
It's my personal opinion (that is, not supported by any authoritative source) that decedents who received an economic impact payment in error will not have to pay it back. The objective of the law was to get money quickly into the hands of the public. The only provision in the law for paying back an advance is to offset back child support or if fraud is involved. If you receive too much now, you don't have to pay it back. Since the decedent, nor any representative of the Estate, took action to apply for the payment, there is no fraud. At worst, the payment is an error by the Treasury Department.
Again, this is only my opinion.
Ira Smilovitz, EA Leonia, NJ
Reply to
ira smilovitz

It may not be in the legislation, but under general common law principles when money is paid incorrectly it can always be demanded back. You know the IRS better than I do, but my guess is that they would be very quick to ask for money back that was mistakenly paid.
Reply to
Stuart O. Bronstein
If the check is good for a year there is really nothing you have to do now and no decision needs to be made until a few days before your duties as personal representative automatically terminate next March. At that point if you are convinced the IRS won't want to claw back the money from you, feel free to endorse the check over to the charity, mail it to your contact at the charity, and let them figure out how to cash it. If they complain, you can point out that you were officially terminated as personal representative and no longer have the authority to do anything.
Reply to
BignTall

Does the check say on its face that it's good for a year? Or is there some regulation to that effect?
Generally a check is good indefinitely (well, until the statute of limitations runs) unless it says on its face it's good for a shorter time. However banks are not required to honor a check they normally would be required to honor, if it's more than six months old.
Reply to
Stuart O. Bronstein
"Stale-Dated Check?A stale dated check is a non-negotiated U.S. Treasury check that is one year old or older from the check issue date."
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Reply to
paultry
An DoT sample check shows the one-year note right above the numeric dollar amount.
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Reply to
Anonymous
There has been a hue and cry for the return of money disbursed correctly under the new law, with money being returned, so don't be surprised if there is a hue and cry for money paid out to dead people to be repaid.
Reply to
Taxed and Spent
The check I have (made out to the deceased, explicitly noting that the person is deceased) states, under the dollar amount, "void after one year."
Reply to
Elle Honda.Lioness
In article snipped-for-privacy@googlegroups.com,
The IRS made a direct deposit yesterday of $1200 to the estatate account of which I am the executor. The estate's already filed its final tax return so I guess I'll just leave it there and see what happens.
Reply to
John Levine
I too filed the final Form 1041 several weeks ago. If the stimulus check does become a legal asset of the estate, first, I figure it is not income. In particular, I believe the CARES Act and many web sites say it is not taxable income. The addition of the $1200 does not change the bottom line on my late friend's estate's Form 1041. Nor does it change any of the numbers on the Schedule K-1s. Right now, even if the $1200 is the estate's to keep, I do not plan on amending the Form 1041.
If the $1200 does not have to be returned, then the (well-staffed nationally known) charity wrote me that it is ready to give me instructions on how to sign the check over to it.
Ira, thank you for your input. It seems a lot of tax and legal experts are opining the same. The last semi-official word I got was from a nationally known financial columnist who was in touch with the IRS on this subject a few days ago. The IRS told her that for now, folks in my situation should not distribute the money to beneficiaries or make any other assumptions about whether it is the estate's to keep.
Given how (1) explicit the CARES Act is about how estates are not eligible; and (2) the check is clear that the principal payee is deceased and the personal representative of the estate is a payee, I continue to wonder if common law or some other law about IRS mistakes will kick in, along the lines of what Stu posted. Not that my opinion counts, but I think it really ought to. I do not think it is hyperbole to suppose that things are chaotic at the U. S. Treasury Department at this point. I think staff there may not have a handle on all the money being printed and given away and in many instances, whether it is right, under the law, to give it away. For the sake of all manner of stability, I figure they must clamp down at some point.
Reply to
Elle Honda.Lioness

One approach is to let the charity know (in writing) that there is a risk the IRS could ask for the money back, and ask them to decide how they want to handle it. Then if (when) that happens, you'll be protected and it will be their problem to deal with.
Reply to
Stuart O. Bronstein

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