What happens to me if he gets caught?

Buckets said:

What is the name of your state? California.

This is a real touchy subject because it deals with family loyalty, inheritance and the tax man.

My father and mother's estate is composed of real estate (six houses, an undeveloped lot, and a strip mall), stocks (about $25k), and some cash (I'm guessing about $70K or $80k). The estate's value is about $10 million, I guess, and as you can see, it's not exactly liquid assets.

The estate is in a revokeable A/B trust right now, and my father and mother are still alive.

I'm kinda the responsible one of their two children. I work, keep records and pay my taxes.

My brother, on the other hand, is a bit of a twit. He is a contractor who gets paid by cash private people for fixing decks and redoing kitchens, but he doesn't exactly make any effort not to leave a paper trail. He has not filed taxes in about a decade and pretty much thinks he's bulletproof.

My question is: How likely is my brother to rise to the IRS's attention when my parents die and the estate is distributed? If my brother and I have a 50/50 split on the houses and other non-cash assets and my brother gets nailed by the IRS, can the IRS force the sale of assets that he only owns half of?

In how much peril is the estate if my brother remains a beneficiary?

And, I guess most importantly, is there anything I can do to protect the estate and myself?

... and disinheriting him is not an option. My parents won't do that for any reason ever. Bless their hearts, but they are loyal.

Click to expand...

abezon said:

You could also ask your parents to look into a 'spendthrift' trust for him. It's a trust designed to protect the beneficiaries from their own financial imprudence. The trustee is in charge of determining whether any money gets distributed & when. The trust would own the real estate & stocks, and the IRS could not go after them because the assets aren't in his name. If the IRS does go after him, it can only ever get the money actually distributed from the trust. So, in the even the IRS goes after him & his assets, what the trustee would do is hold onto the trust assets until he settles with the IRS, then distribute things to him once the IRS has given up & gone away.

This is very complicated, so your parents would need to use a sophistocated estate planner to make sure the trust assets are protected from the IRS. They could set up the trust & have it funded (via the A/B trust) only if he is not current on his taxes when they die.

Click to expand...