Responsibilities of a successor in filing a Small Estate Affidavit

[KromBoy]

What is the name of your state (only U.S. law)? Colorado

Hello, I am trying to get a few questions answered about a probate case.

This involves a family friend of mine and his friend.


My friend, let's call him A. and his friend B.

A was given the power of attorney regarding the funeral proceedings of B, B passed away in June and left no family in the country at all.

B left an unofficial will to A asking him to sell off his cars (he left no other significant estate) and donate portion of the money to his church and to send the rest to his brother who resides in South Korea.

Since a probate case will be costly, A planned to do this via filing a small estate affidavit and become a successor of B.

However, B has roughly $10,000 in backed taxes to the IRS that he owes and A is worried about being burdened with the responsibilities of repaying the amount.



So here are the questions.

1. Will A be responsible for B's debt if he was to become his successor by means of a small estate affidavit?

2. How much will he be responsible for? Will he be responsible for the full $10,000? Or the value of estate B left him?

3. If in the latter case, how are the values of the cars calculated? B left 3 cars, 2 of them are fairly old and worth only a few hundred dollars, a third one has a blue book value of about $8,000, but its engine is broken and thus is only worth a couple thousand dollars.

So if the value of the cars are calculated at blue book value, A stands to possibly having to pay back all of B's backed taxes.
But if the value of the cars are calculated at how much A sold them for, (he plans to sell them all below the blue book value) then he only stands to owe maybe a thousand which he says he is willing to cover.


Thank you for reading and your advice.

 

[Zigner]

It sounds like there are more debts than assets. Perhaps B ought to just walk away...

 

[KromBoy]

It sounds like there are more debts than assets. Perhaps B ought to just walk away...

Yes, that is likely the case.. But the problem is:

1. One of the cars actually belonged to A. while B's car was broken down, A transferred the title of his old car to B to use, this took place in February of this year.

2. A wants to follow through on his friend's wishes, but not if he has to risk putting himself $10,000 in debt.


So if any law expert can affirm that A will only be responsible for such and such amounts, then A can make an informed decision about whether or not to file the small estate affidavit.

If it turns out he'd be responsible for all $10,000 then I think he'll just have to let it go.

 

[LdiJ]

Yes, that is likely the case.. But the problem is:

1. One of the cars actually belonged to A. while B's car was broken down, A transferred the title of his old car to B to use, this took place in February of this year.

2. A wants to follow through on his friend's wishes, but not if he has to risk putting himself $10,000 in debt.


So if any law expert can affirm that A will only be responsible for such and such amounts, then A can make an informed decision about whether or not to file the small estate affidavit.

If it turns out he'd be responsible for all $10,000 then I think he'll just have to let it go.

A will never be responsible for B's debts, but A, as the administrator for B's estate will be responsible for using all of the money from B's estate to pay the IRS first, and creditors second, before distributing any money to anyone else, including himself.

 

[KromBoy]

A will never be responsible for B's debts, but A, as the administrator for B's estate will be responsible for using all of the money from B's estate to pay the IRS first, and creditors second, before distributing any money to anyone else, including himself.

Thank you for your input, that clarifies the issue somewhat.

So how will the IRS notify A of B's backed taxes?

I read somewhere that creditors and heirs (not an issue in this case) have up to a year to file a claim against a successor for any money owed. Will the IRS do the same? Or is it an honor system where A simply has to research all sources of debt B has before dividing up any of his estate?

Again, the large part of my question is "How does the IRS assess the value of B's property?"

As I said, B's cars are really not worth very much money, A has decided to donate one of the car to his church member as a gift, sell another (for $500) and probably have the mechanic deal away with the third car (with a blown engine, worth maybe $1,000, but blue book value $8,000)

But if the IRS decides to file a claim against A "Hey, you sold 3 cars valued at $10,000+ going by the blue book", he could end up in a sticky situation.

However, if the IRS decides NOT to file a claim at all
OR decides to file a claim but says "Hey, DMV records show you sold all 3 cars for $1,000 and spent $400 for the cremation, you owe us $600", then A will be okay with that loss.

 

[tranquility]

Thank you for your input, that clarifies the issue somewhat.

So how will the IRS notify A of B's backed taxes?

I read somewhere that creditors and heirs (not an issue in this case) have up to a year to file a claim against a successor for any money owed. Will the IRS do the same? Or is it an honor system where A simply has to research all sources of debt B has before dividing up any of his estate?

Again, the large part of my question is "How does the IRS assess the value of B's property?"

As I said, B's cars are really not worth very much money, A has decided to donate one of the car to his church member as a gift, sell another (for $500) and probably have the mechanic deal away with the third car (with a blown engine, worth maybe $1,000, but blue book value $8,000)

But if the IRS decides to file a claim against A "Hey, you sold 3 cars valued at $10,000+ going by the blue book", he could end up in a sticky situation.

However, if the IRS decides NOT to file a claim at all
OR decides to file a claim but says "Hey, DMV records show you sold all 3 cars for $1,000 and spent $400 for the cremation, you owe us $600", then A will be okay with that loss.

The IRS does not so much "notify" as you tell them your theory and they tell you if they agree. See a tax professional.

Personally, I don't think you want to take this responsibility. You don't need to wonder what the IRS will say, you need to know what you can prove. Because it seems you will profit from this, it appears you might not be careful in preparing your case.

 

[LdiJ]

Thank you for your input, that clarifies the issue somewhat.

So how will the IRS notify A of B's backed taxes?

I read somewhere that creditors and heirs (not an issue in this case) have up to a year to file a claim against a successor for any money owed. Will the IRS do the same? Or is it an honor system where A simply has to research all sources of debt B has before dividing up any of his estate?

Again, the large part of my question is "How does the IRS assess the value of B's property?"

As I said, B's cars are really not worth very much money, A has decided to donate one of the car to his church member as a gift, sell another (for $500) and probably have the mechanic deal away with the third car (with a blown engine, worth maybe $1,000, but blue book value $8,000)

But if the IRS decides to file a claim against A "Hey, you sold 3 cars valued at $10,000+ going by the blue book", he could end up in a sticky situation.

However, if the IRS decides NOT to file a claim at all
OR decides to file a claim but says "Hey, DMV records show you sold all 3 cars for $1,000 and spent $400 for the cremation, you owe us $600", then A will be okay with that loss.

I am going to repeat...B CANNOT donate any of A's goods or cars if A has debt. The funeral and A's debts MUST be taken care of before ANYTHING can be dispursed anywhere else.

If B cannot understand that, B should not take on the responsibility. B MUST sell everything and give all of it (after funeral expenses) to the IRS if it is less than or equal to A's tax debt. If there is any amount left over, then B must pay any other debts A has first.

 

[anteater]

I am going to repeat...B CANNOT donate any of A's goods or cars if A has debt. The funeral and A's debts MUST be taken care of before ANYTHING can be dispursed anywhere else.

If B cannot understand that, B should not take on the responsibility. B MUST sell everything and give all of it (after funeral expenses) to the IRS if it is less than or equal to A's tax debt. If there is any amount left over, then B must pay any other debts A has first.

I think that you got the A's and B's mixed.

Don't know how that could happen. They are such distinct names!