Estate and Elder Law

Beneficiary and Fiduciary Liability for Income, Gift and Estate Taxes


It can be either a blessing or a curse to be appointed as the Personal Representative of an estate or Trustee of a trust (collectively a “Fiduciary”). One of the most over looked aspects of the job is the fact that the U.S. Government has a “general tax lien” on all estate and trust property when a decedent leaves assessed and unpaid taxes and a “special tax lien” for estate taxes on a decedent’s death. As a result, when advising a Fiduciary on the estate and trust administration process it is important to inform them that with the responsibility also comes the potential for personal liability.
 
On many occasions a Fiduciary may be placed into a position where assets passing outside the probate estate (life insurance, jointly held property, retirement accounts, and pension plans) or trust, over which they have no control, constitute a substantial portion of the assets (real property, stocks, cash, etc.) subject to estate taxation. Without the ability to direct or assume control of the assets the Fiduciary may have both a liquidity problem and lack of means to satisfy the estates tax (income or estate) obligation. For this reason alone, a Fiduciary should be very reluctant to distribute any funds to a beneficiary before all statute of limitation periods expire for the Internal Revenue Service (“IRS”) to assess a tax deficiency.
 

Marc Soss' practice focuses on estate and tax planning, probate and trust administration and litigation, guardianship law, and corporate law in Southwest Florida . Marc has published articles and been quoted in the Florida Bar, Rhode Island Bar, Association of the United States Navy, Lawyers USA, Bradenton Herald (Around the Ranch), Military.Com, Forbes.Com, and CNN Business. He can be reached at (941) 928-0310 or mjs@fl-estateplanning.com 

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any matter addressed herein.