Debts and responsibility of heirs

[PsychePunk]

What is the name of your state? California


My father died with little assets. He had about $4000.00 in cash and a car valued about $5000.00.

He died owing state and federal taxes. His only other real debts came after his debt, funeral and hospital expenses. We used the cash from his estate to pay for part of the funeral expenses, covering the balance ourselves. Nothing has been done as of yet with his car.

We found out about the taxes owed a few months after he passed. Our we responsible for paying any of this? I understand that any income from the car would go to pay this debt. My brother believes we have to pay the amount that we gave the funeral home because his tax debt takes priority. We couldn't have buried our Dad without paying for the funeral right away. We haven't profited at all from dad's estate and this isn't a issue. I just don't believe we are responsible for any of his debt.

What are our obligations?What is the name of your state?

 

[tecate]

Transferee liability is a complicated subject, to say the least.

How were titles to the two assets held? What did you do to clear title? This may figure into whether the federal tax has priority over the other debts and whether you are liable for the other debts.

The problem here is the notion most hold that funeral expenses are a debt of the decedent. Actually, the person who signs the papers for the expenses is stuck with them unless others will pitch in, the person files a creditors claim in a formal probate, or there is someone else having the contractual liability to reimburse, such as a trustee.

 

[PsychePunk]

Both assets were held in my father's name. My brother is a tax attorney and has been handling the estate.

I am beginning to think that an argument between my two brothers and 'being right' has started to take priority over doing things the best way for everyone. I am trying to find out what our actual responsibilities are so that we meet them.

When my father passed he had cash in the bank of $1316. He had two uncashed pay checks totalling $1212. He owned a car with a blue book value around $6000.00. All assets were in my father's name. The checks are still not cashed. The car is not sold, titled not transfered. The cash is still in his banking account.

There was a life insurance policy of $6,582. The funeral expenses came to $9589. We all agreed to use our insurance money to pay the balance and one brother put that on his credit card. (9589 - 2528 = $7061).

A few months later my other brother (the lawyer) states that what we are doing is illegal. That we need to keep the insurance money and use the proceeds from the sale of the car to pay for the funeral expenses. This is where the trouble started. Except for him, we couldn't see that it mattered how we paid the balance for the funeral. What was important was getting the balance off the other brother's credit card. If the car sold later we could split that between us.

Then the tax bill came from the state of California, for taxes our Father owed from past years. My brothers were still arguing what I saw as semantics since there were no other real assets or debts (except for the hospital) in my father's estate. Suddenly, my lawyer brother states that the taxes take priority over everything and the funeral expenses (we had thought were already paid by him) would not be covered.

I know most of this is dumb bickering, but it is within that that my problem lies. I don't trust that the lawyer brother is being completely honest about our options or perhaps even knows enough about our options. At this point I feel like he needs to win the arguement. It is all stupid and I have stayed out of it, but as a retired CPA with just enough knowledge to be dangerous I now feel like I need to step in and make sure the right thing is done.

If I could get a clearer idea on the law here I might know which direction to turn.

Thank you, Debbi

 

[tecate]

If there isn't a formal probate, then sometime in the past, you and your brothers probably cleared title to the assets under Section 13050 et. seq. of the Probate Code. The personal liability of the transferees attaches under Section 13109 and gives the Franchise Tax Board the same remedies as it had against your father.

In turn, Rev and Tax Code Section 19073 bridges back to the collection provisions.

For federal taxes, there is a general priority over other debts under R.S. 3467, but I am not aware of one for California taxes, even if there is a formal probate. (See Probate Code Section 11420 for the order of payment in a formal probate. In fact, the Franchise Tax Board, although governed by separate provisions, needs to file creditors claims also.)