Executor not reimbursed

[TAXNJ]

Would a Federal form 1041 be filed and report expenses on K-1 or not file form 1041 and take expenses on Federal form 1040 schedule A ?

SCENARIO:

Executor paid with own money for Estate expenses for funeral, attorney & accountant fees due to lack of estate assets.

Estate assets were less 1k

No Federal Estate required or filed therefore expenses not taken

However, both state Inheritance and Estate returns were filed. Reason filed was to establish and prove that some other assets purchased only to the Executor though both names shown (not husband & wife) on these assets and establish and prove not part of the Estate for state purposes.

[taxea]

I would think that any estate assets would have to have been sold to reimburse the TP for expenses paid out of personal funds for the expenses to be deducted from the estate return. What you have described as expenses paid by TP are not deductible on personal return other than, maybe, a portion of the atty fees. But that depends on what services the atty provided.

[TAXNJ]

Yes ...

I would think that any estate assets would have to have been sold to reimburse the TP for expenses paid out of personal funds for the expenses to be deducted from the estate return. What you have described as expenses paid by TP are not deductible on personal return other than, maybe, a portion of the atty fees. But that depends on what services the atty provided.

Agree with "I would think that any estate assets would have to have been sold to reimburse the TP for expenses paid out of personal funds for the expenses to be deducted from the estate return", but when the estate assets becomes insolvent and cannot pay remaining expenses - this creates the new issue of the Executor expenses paid out of pocket.

Why only "maybe, a portion of the atty fees. But that depends on what services the atty provided". Both attorney and accountant fees strictly related to preparation of the state Inheritance and Estate returns and would be deductible therefore both should be considered deductible.

Also, would Executor take deductions on federal form 1040 - Schedule A or from federal form 1041 (only listing expenses) K1

[CamCHernandez]

What does the trust declaration say as to how to be paid? Also what does the probate code of the state say as to how to be paid in the event that it is not in the trust declaration?

[TAXNJ]

What.. But

What does the trust declaration say as to how to be paid? Also what does the probate code of the state say as to how to be paid in the event that it is not in the trust declaration?

Reference prior post. Obliviously, assets to pay Estate expenses, but Estate had small amount of assets to even cover a small fraction of the expenses mentioned. So the "Trust Declaration" or even the state probate code (another expense to go to probate - paid by Executor's funds) is out of the picture

So the issue remains how the Executor expenses paid with Executor's own funds (Estate does not have any assets to reimburse the Executor) to be deducted.

[TAXNJ]

Any

Any comments on the Original Post question?

[taxea]

payments for expenses made by Executor out of personal funds are not deducted on personal return of Executor. They are reimbursed to Executor by estate and deducted on estate return only. Whether or not reimbursed they cannot be taken on Executor's personal 1040.

As for atty fees they again would only be deductible on estate return and only if the estate reimbursed the Executor. They are not deductible on the personal return of the Executor.

[Burke]

Executor paid with own money for Estate expenses for funeral, attorney & accountant fees due to lack of estate assets.

Estate assets were less 1k

No Federal Estate required or filed therefore expenses not taken

However, both state Inheritance and Estate returns were filed. Reason filed was to establish and prove that some other assets purchased only to the Executor though both names shown (not husband & wife) on these assets and establish and prove not part of the Estate for state purposes.

Can you rephrase that last sentence? It does not make sense, and I can't understand exactly what you are saying transpired. Note that even if the executor had been reimbursed for the funeral expenses, that is not a deductible item on the Form 1041. You can treat the funds the executor paid on behalf of the estate as a loan, and that should make the attorney's and accountant's fees deductible. If deductible expenses exceed the estate's taxable income for the final estate tax year, then you have an Excess Deductions on Termination of an Estate. These are passed through to the beneficiary, and they may be deducted on Sche A if they can itemize. Hopefully, the executor and the beneficiary are the same person (not disclosed.)

[TAXNJ]

Can you rephrase that last sentence? It does not make sense, and I can't understand exactly what you are saying transpired. Note that even if the executor had been reimbursed for the funeral expenses, that is not a deductible item on the Form 1041. You can treat the funds the executor paid on behalf of the estate as a loan, and that should make the attorney's and accountant's fees deductible. If deductible expenses exceed the estate's taxable income for the final estate tax year, then you have an Excess Deductions on Termination of an Estate. These are passed through to the beneficiary, and they may be deducted on Sche A if they can itemize. Hopefully, the executor and the beneficiary are the same person (not disclosed.)

Yes and thanks for the reply and form 1041 is the best vehicle to use.

1 - deceased (parent) total assets less than $1k

2 - Executor (son, who is also a co-beneficiary) had a brokerage account with deceased (parent) named as a JTWROS. However, the deceased did not contribute any funds and/or withdrawal any funds or participate in the brokerage account activity. Brokerage account amount was below the amount for federal filing, but subject to state filing. Note, that was the reason "both state Inheritance and Estate returns were filed.

Also, the additional reason the state returns filed was to establish and prove that the other asset (brokerage account) was purchased only by the Executor, (though both names shown (son & parent) on this asset), and establish and prove it is not part of the Estate for state purposes."

It was found that for the particular state, the state tax laws/statues states:

Only that part or interest in such property which the surviving joint tenant or tenants prove, to the satisfaction of the Director of Taxation, to have originally
belonged to him or them and not the decedent, is exempt from the tax.

That is the position taken to have the “brokerage account” exempt from the state tax which the Executor can prove.

Also, the Executor is co-beneficiary with another family member.

Hopefully this is clearer.

[Burke]

I think I get it. The brokerage account belongs to the son and is not part of the estate, which is normally the case when you have JTROS ownership. In this case, with 2 benes (by law or will), the deductions I mentioned passing through to the heirs will be split 50/50 based on the info in your post. There may have been other deductible expenses as well, such as cost of death certificates, costs of filing the tax returns, administrative, etc -- probate and the like.