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Left over debt after distributions have been made

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William Andrews

New member
My brother is the executor of my mother's estate. He distributed funds before paying all the bills -- legal and federal tax. He doesn't appear to be willing to pay them or do anything about them. Does the attorney and IRS have remedy options against the beneficiaries? The estate was in Wisconsin, though I live in Minnesota.
 


Zigner

Senior Member, Non-Attorney
What US State?
Generally, here in the US, the creditors may be able to force a return of any assets/funds that were improperly distributed. Additionally, the representative of the estate could be on the hook personally.
 

LdiJ

Senior Member
My brother is the executor of my mother's estate. He distributed funds before paying all the bills -- legal and federal tax. He doesn't appear to be willing to pay them or do anything about them. Does the attorney and IRS have remedy options against the beneficiaries? The estate was in Wisconsin, though I live in Minnesota.
They certainly can go after HIM, and they will. He was obligated as the executor to pay those things before distributing any money. He can go after the other beneficiaries to try to recover some of the money distributed.
 

William Andrews

New member
So, if my brother refuses do handle this, am I liable? See below from will. BTW, he's been the executor all along.

In the event JAMES C. ANDREWS declines to act, predeceases me, is unable to
act for any reason or resigns after being appointed, then I nominate and appoint my son,
WILLIAM W. ANDREWS, as Personal Representative of my estate.
 

Zigner

Senior Member, Non-Attorney
So, if my brother refuses do handle this, am I liable? See below from will. BTW, he's been the executor all along.

In the event JAMES C. ANDREWS declines to act, predeceases me, is unable to
act for any reason or resigns after being appointed, then I nominate and appoint my son,
WILLIAM W. ANDREWS, as Personal Representative of my estate.
You don't have to accept.
 

TrustUser

Senior Member
you stated that your brother does not want to do anything about it ?

but i havent heard you say that you are willing to give up your share, to make the payment ?
 

Taxing Matters

Overtaxed Member
My brother is the executor of my mother's estate. He distributed funds before paying all the bills -- legal and federal tax. He doesn't appear to be willing to pay them or do anything about them. Does the attorney and IRS have remedy options against the beneficiaries? The estate was in Wisconsin, though I live in Minnesota.
The executor is personally responsible to the IRS to the extent of the improper distributions that were made, and the IRS may also go after the beneficiaries to the extent of the distributions they received.
 

not2cleverRed

Obvious Observer
So, if my brother refuses do handle this, am I liable? See below from will. BTW, he's been the executor all along.

In the event JAMES C. ANDREWS declines to act, predeceases me, is unable to
act for any reason or resigns after being appointed, then I nominate and appoint my son,
WILLIAM W. ANDREWS, as Personal Representative of my estate.
The problem is, he didn't decline to act, he was just incompetent.

You need to get a lawyer and have your brother removed as executor if he will not do his job.

As TM pointed out, the IRS could come after beneficiaries if all the assets were dispersed without paying the taxes.
 

LdiJ

Senior Member
The executor is personally responsible to the IRS to the extent of the improper distributions that were made, and the IRS may also go after the beneficiaries to the extent of the distributions they received.
I had a client who was the executor of an estate. The deceased had a large amount of cash that she was leaving to multiple relatives and she left her house to him. He made the mistake of not doing her final, personal tax return until after he had made the distributions. She ended up owing a very large amount of tax. The IRS went after the executor and the executor had to go after the other heirs.
 

Taxing Matters

Overtaxed Member
I had a client who was the executor of an estate. The deceased had a large amount of cash that she was leaving to multiple relatives and she left her house to him. He made the mistake of not doing her final, personal tax return until after he had made the distributions. She ended up owing a very large amount of tax. The IRS went after the executor and the executor had to go after the other heirs.
Exactly why the executor should be getting competent legal and tax advice for the estate. I advise my executor clients not to ensure that the estate retains sufficient assets to pay all the debts, including any tax liabilities that may arise from returns yet to be filed or from audits by tax agencies. For the IRS I will generally seek a closing letter for the estate before giving the ok for distributions. Executors that are overly eager to get the estate distributed fast sometimes shoot themselves in the foot in the process when they discover debts that had yet to be paid later on with no estate assets left to pay them.
 

t74

Member
I had a client who was the executor of an estate. The deceased had a large amount of cash that she was leaving to multiple relatives and she left her house to him. He made the mistake of not doing her final, personal tax return until after he had made the distributions. She ended up owing a very large amount of tax. The IRS went after the executor and the executor had to go after the other heirs.
Did an heir named or by law have to receive something from the estate in order to be liable for repayment? How was/should the recovery been apportioned - equally or propotionally to the value received?
 

t74

Member
Exactly why the executor should be getting competent legal and tax advice for the estate. I advise my executor clients not to ensure that the estate retains sufficient assets to pay all the debts, including any tax liabilities that may arise from returns yet to be filed or from audits by tax agencies. For the IRS I will generally seek a closing letter for the estate before giving the ok for distributions. Executors that are overly eager to get the estate distributed fast sometimes shoot themselves in the foot in the process when they discover debts that had yet to be paid later on with no estate assets left to pay them.
What do you do when the executor refuses to seek legal counsel or file for a small estate? The value of the probate estate is in personal property which the executor either is claiming and would refuse to sell or has already given to charity.
 

Taxing Matters

Overtaxed Member
Did an heir named or by law have to receive something from the estate in order to be liable for repayment? How was/should the recovery been apportioned - equally or propotionally to the value received?
How the executor goes after the beneficiaries depends on the applicable state law, and states have varying rules for this.

As for the IRS, it can pursue the beneficiaries up to the full amount amount the beneficiary got, and it has no obligation to go after beneficiaries proportionally. It can collect the tax from the easiest beneficiaries to find and get the money from.
 

Taxing Matters

Overtaxed Member
What do you do when the executor refuses to seek legal counsel or file for a small estate?
If the executor refuses to consult lawyers and tax professionals then the executor put himself/herself at risk for being liable to the creditors. Beneficiaries can try to hold the executor accountable to pay bills, but in the end they have to realize that if creditors of the estate come after them for payment they may have to cough up some or all of what they received from the estate. Thus, beneficiaries should not be quick to spend what they get.
 

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