Tax liability after estate has distributed all funds

Aug 18, 2013 5 Replies
M

My brother became the trustee of my mother's estate upon her death in 2010 (no surviving spouse). All of the funds in the estate have been distributed to beneficiaries, and there was no probate. (There is still an inherited annuity which will be distributed in 2 more years.) The amounts distributed exceed the taxes due.



There is an outstanding tax liability of the estate because incorrect information was submitted to the IRS for the final 2010 estate tax return, filed in March, 2011 regarding capital gains. Is the trustee personally liable for the taxes at this point?


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S

If he can't get enough money back from the other beneficiaries to pay the IRS, he will be able to be held personally liable for whatever he is short. The reason is that he had the money in his hands to pay the IRS, could have paid them, but didn't. Now he has to make sure they do get paid.

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A

31 USC 3713(b) says that a representative of an estate that pays an estate?s debt before paying the IRS is liable if the government doesn?t get paid. As a reference, 26 USC 6234(a)(2) is where you will find the law for beneficiary liability for unpaid estate taxes.
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R

And this is likely why when I was an executor, the estate's lawyer made all beneficiaries sign an instrument agreeing to clawback if the taxes ended up being higher than expected.

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P

As a reference, 26 USC 6234(a)(2) is where you will find the

that would be 6324

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A

That's why cut and paste is better than typing it yourself.

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