Back taxes and legal fees

[NBrazil]

What is the name of your state (only U.S. law)? Wisconsin/Florida/(Australia)

Here's the deal. Simple will, three equal beneficiaries if anything left over. One asset, a property, which sold and the proceeds were used to immediately pay off the refinance with funds left over.

The estate hired an attorney (in each location) and an accountant (in Australia). Okay, I know, I know that you do not advise on Australian law and I'm not seeking an opinion there, but I think the question I'm going to pose is generic enough.

Anyway, the estate is responsible for payment to the attorneys, accountant and debts with the hope that some will be left over (but that isn't important, the beneficiaries do not expect much, if anything at all). However, the accountant has discovered that the deceased neglected to report rental income on the property since 1996! Therefore, it will become necessary to re-file all those tax returns, pay back taxes, penalties and interest which will be significant. So significant that it is entirely possible that the funds left over from the sale (after capital gains tax too) will be inadequate.

Of course even the government can't get blood from a stone (money from what would then be a bankrupt estate), but what about the attorneys and accountant? When probate was started the executor knew about the property and what was owed, but did not expect the back tax burden. Consequently arrangements were made to pay for services rendered from the proceeds to be obtained from the estate.

Now 18 months into everyone finds this out. Can an executor be held accountable to pay debts and legal fees personally in the event that back taxes eat up every last dime (and then some)? Hey, I'm not saying that this is right, but will legal fees just become another "creditor" in line after the government (which I figure gets first priority), and, like other debtors, have to accept that nothing is there? Or will the executor per personally liable for those fees?

This is an oversimplification that pretty much illustrates the gist of the problem. What is the name of your state (only U.S. law)?What is the name of your state (only U.S. law)?

 

[anteater]

Still dealing with the multinational production, eh?

I certainly don't want to venture too far here, but under Wisconsin statutes, the cost of administering the estate are first in line for payment. That would include legal and accounting fees:

859.25 Priority of payment of claims and allowances.
(1) CLASSES AND PRIORITY. At the time of their allowance, all
claims and allowances shall be classified in one of the following
classes. If the applicable assets of the estate are insufficient to pay
all claims and allowances in full, the personal representative shall
make payment in the following order:
(a) Costs and expenses of administration.
(b) Reasonable funeral and burial expenses.
(c) Provisions for the family of the decedent under ss. 861.31,
861.33 and 861.35.
(d) Reasonable and necessary expenses of the last sickness of
the decedent, including compensation of persons attending the
decedent.
(e) All debts, charges or taxes owing to the United States, this
state or a governmental subdivision or municipality of this state.
...

But, if the Aussies are owed money, that's out of my league.

 

[NBrazil]

But, if the Aussies are owed money, that's out of my league.

Yeah, my brother is still dealing with it. When I asked what was taking so long (thought it was simple - 1 asset, multiple creditors - hey, PAY THEM OFF with the sale and move on... but nooooooo, this came up) he told me about this and I simplified it here.

Yeah, granted that this is out of anyone's league here, but it begs the question (maybe this will help someone else)... are you saying that if something similar happened in the USA, that Wisconsin law states that the administering costs come BEFORE federal back taxes and penalties? Wow, I like that. So the attorneys and accountants come before the feds. I wonder how the feds would respond if a lot was owed? One would hope that they would follow the rule of law (uh oh, getting political here - ignore that last sarcastic comment).

Anyway thanks for the reference and response (and remembering!!!!). I consider this thread simply a discussion, not an end all attempt to figure out what to do. And, of course, I expect the Australian attorneys to know what's up in this situation.

Hopefully this will mean that (with what I hope are similar, common sense laws) my brother (the executor) won't be on the hook for expenses. He has a business and resources, but if I were the executor, well, I've got nuthin'.