The death of a loved one can be an extremely difficult and stressful time for descendants. However, it is also a time that where a heightened level of scrutiny should be used when administering the decedent’s estate. Federal income taxes owed by a decedent’s estate may take priority over other claims and expenses, especially when the estate is insolvent. If the estate is improperly administered, the descendants could be held liable for the federal income taxes owed by the decedent.
As a general rule, all claims against an estate or decedent must be paid in the following order: (1) federal tax liens; (2) estate administration expenses; (3) surviving-spouse awards; and (4) debts due to the federal government. If the representative of an insolvent estate distributes assets or funds out of the order described above, the estate representative can be held personally liable. To avoid such liabilities, estate representatives should search for and review the decedent’s tax papers to determine whether the decedent was current on his or her taxes.
To receive knowledgeable and up-to-date advice on how to navigate this complex legal field, call the attorneys at Rock Fusco & Connelly.