Estate - Representative

[S T]

Question,

Taxpayer passed away 11/07 (single taxpayer) insolvent, more debts than assets. Taxpayer had a will naming a cousin as personal representative/executor with an alternate estate respresentative. The cousin was also named on a joint tenancy bank account, although he had not contributed to that account.

In some discussions with an attorney, the cousin can decline the "nomination" as personal representative/executor as well as the alternate named nomination.

The question arises as to if a final return needs to be filed and by whom?

Based on Pub 559

Personal
Representative
A personal representative of an estate is an executor, administrator, or anyone who is in
charge of the decedent’s property. Generally, an executor (or executrix) is named in a decedent’s
will to administer the estate and distribute properties as the decedent has directed. An
administrator (or administratrix) is usually appointed by the court if no will exists, if no execu-
tor was named in the will, or if the named executor cannot or will not serve.

In general, an executor and an administrator perform the same duties and have the same
responsibilities.

For estate tax purposes, if there is no executor or administrator appointed, qualified, and
acting within the United States, the term executor includes anyone in actual or constructive
possession of any property of the decedent. It includes, among others, the decedent’s agents
and representatives; safe-deposit companies, warehouse companies, and other custodians of
property in this country; brokers holding securities of the decedent as collateral; and the debtors of
the decedent who are in this country.

My thought is that the cousin needs to file the return since he is named as a joint tenant on the primary bank account, and has a responsibility, even if he declines the nomination of executor/personal representative in the will. The attorney seems to think that the resignation of the nomination of the executor in the will can relieve either of the parties named in the will of any IRS/State filing responsibliity.

Seems like the only assets that might be available, could be a life insurance policy through Calif State Retirement System, which the cousin will receive due to a beneficiary designation, and that would not have to go through the probate courts and probably can not be jeopardized by creditor claims.

How to proceed and "who" is responsible for filing the final return of a single deceased taxpayer with no immediate family?

Based on preliminary information and having prepared the prior year returns, there should be a refund on the 2007 tax return. Of course everyone is concerned about the insolvency of the taxpayer's estate and the creditor claims. Attorney is not addressing tax issues only legal issues.

Any insight?

Thanks,

Sandy

[Bees Knees]

If you want to escape IRS filing responsibility, you cannot inherit any of the assets.

According to your quote, anyone in possession of anything becomes the representative absent anyone else. That would include inherited life insurance and joint tenancy bank accounts.

If cousin wants any of that, cousin needs to make right with IRS filing requirements. If cousin doesn’t want to mess with any of that, cousin needs to disclaim all assets, including the life insurance proceeds.

I don't know about creditor and liability issues. The Attorney knows about that. I'm just talking about IRS filing responsibilities.

[S T]

Personal Representative

Thanks Bees,

That is also the way I interpret the IRS as to who they look to as a personal representative, a slightly different standard than legal/court appointed. And this particular t/p estate will not be probated, so no court overseeing.

I believe, that the cousin can disclaim the life insurance, but can he disclaim the joint tenancy account that he has signed on, and the bank has a record via signature card? Since he was on the joint tenancy account as of the date of death, wouldn't the IRS still look to him as a personal representative?

Sandy

[Gene V]

Question,


The question arises as to if a final return needs to be filed and by whom?


Any insight?

Thanks,

Sandy

From Pub. 17

You must file a final return for a decedent (a
person who died) if both of the following are true.

• You are the surviving spouse, executor,
administrator, or legal representative.

• The decedent met the filing requirements
at the date of death.

The question is, does he meet the filing requirements?

[DonPriebe]

Apples and tangerines

Are we mixing up the rules for income taxes

From Pub. 17

You must file a final return for a decedent (a
person who died) if both of the following are true.

• You are the surviving spouse, executor,
administrator, or legal representative.

• The decedent met the filing requirements
at the date of death.

with those for estate taxes?

For estate tax purposes, if there is no executor or administrator appointed, qualified, and acting within the United States, the term executor includes anyone in actual or constructive possession of any property of the decedent. It includes, among others, the decedent’s agents and representatives; safe-deposit companies, warehouse companies, and other custodians of property in this country; brokers holding securities of the decedent as collateral; and the debtors of the decedent who are in this country.

[S T]

Final Tax Return

After providing the attorney with the information out of Pub 17 and Pub 559, (for tax purposes only) the realization was that the named executor in the will, could either resign and not receive any life insurance benefits as a named beneficiary or participate in the joint tenant bank account as a survivor.

The attorney advises that the taxpayer will file the appropriate tax returns for the decedent and subsequent form 1041 returns if required. The attorney will issue all of the appropriate lettes to creditors, and pay debts, etc. This estate will not have to file a form 706 or go to Calif Probate Court. In fact the estate is insolvent and the assets are under $50,000. Representative should meet the criteria to file form 1310 for refund on decedents final form 1040 and California form 540.

Final tax return, I do not believe there are any issues. DOD 11/07. Representative will file and sign and receive probably some refunds from Fed and Calif.

Form 1041: The question arises whether or not to file for a TIN # for the estate. I do believe only the Joint bank account will earn interest, although that should be a very small amount. There should be a Federal form 1040 refund, a Calif refund. There are a couple of creditor policies, that I am not sure if they will be paid to the estate or directly to the creditors, but they won't be enough to pay off all of the creditor's claims.

The other question that arises, and why I am asking whether or not to obtain an TIN for the estate, is that I would be almost sure that the creditors are either going to issue a 1099-C cancellation of debt to the deceased in 2008 (usng SSN#) or to the estate of the deceased in 2008 (using TIN # if provided). There is a huge debt that will not be covered under the creditor insurance policy.

If a form 1041 is required in 2008, I would like to open and close as final along with the request for prompt assessment form 4810. What happens if 1099C forms are received after the filing date and the receipt of prompt assesment acceptance.

Has anyone encountered this on an estate?

Sandy

[Bees Knees]

I'm not sure why I would want to take on the executor position if debts exceed assets.

Regardless, for whatever reason, if 1099-Cs are issued for debt forgiveness and the estate was insolvent (liabilities exceed assets), there is no tax on the debt forgiveness. Therefore, it would be a matter of reporting the 1099-C on the 1041 and zeroing it out as being non-taxable. For that reason I would want to get an EIN number for the estate.