If the assets in an estate go away [e.g., invested in stocks and the value plunges or a house burns down or something] so that there's not enough capital left in the estate to pay the estate taxes, who's on the hook for the difference? The heirs haven't gotten anything from the estate [indeed, some of the heirs might not even KNOW they've received a bequest], hardly seems fair for them to have to pay [but then when has 'fair' ever affected IRS rules..:o)] Could the executor be stuck with the tax bill? (on the theory that the executor was responsible for the management of the estate until it is closed)? Can an estate declare bankruptcy? :o).
I know about the dual-valuation [on the date of death and six months after], but what got me thinking about this was the HUGE plunge of United stock the other day (or Enron or any stock that vanishes pretty much overnight): if a lot of the estate's assets were in United stock and the estate were evaluated *before* the plunge, there might well not be enough assets left to pay the estate tax. And so who ends up paying it?
I'm starting to think that for volatile assets, what the executor might have to do to be prudent is liquidate some of the assets [sufficient to cover the [estimated] estate tax] into something more solid.
/Bernie\