No money to pay final tax return HELP!!!

[glgillis]

Yes, it is "must be used."

Estate work- A number of years ago as I grew older, and paid attention to the age and financial condition of my clients, I upped my studying in that area, and must say it has been very profitable. You can get "premium" fees for estate and fiduciary returns. Luckily, in a rural area, I don't see a lot of complicated estates. If I do run into one, I have a good working relationship with a tax attorney and refer them to her. In return, she has referred some very good income tax work to me. She doesn't prepare individual income tax returns.

Good luck.

[Zee]

GLGillis-

One last question. In those situation where the estate's only asset isn't liquid (like a house), and there is a balance due on the decedent's final return will the IRS abate interest & penalties assessed if a timely return is filed without payment, and paid when the home is sold?

[Burke]

The will is the blueprint for everything the executor must do. Also, most officials, commissioners or whatever they may be called in your state who oversee estates (and trusts) and to whom accountings must be rendered, are usually available to answer questions about administration of the estate, at least in my experience. In fact, the ones I deal with have printed packets of instructions to give to executors outlining their responsibilities and deadlines, etc for submitting reports, taxes, and the like. If I ever get involved in doing the fiduciary estate tax returns, the will is the first thing I ask for.

PS: If your client (or his wife who is the executor ?) paid any expenses on behalf of the deceased, like the funeral expenses, taxes, etc., she should make sure she is reimbursed for those expenses before monies are distributed to any beneficiary.

[Kennyabc]

State Law Prevails

The will does is not the only blueprint for determining what the executor has to do. The state law determines that, although most wills inlcude what the executor can do. If there is a conflict between the two the state law prevails. If there are not enough assets to pay the debts in Maryland this is the order in what gets paid: 1.) Register of Wills, 2.) Cost of administration (attorney fees) 3.) Funeral expenses. . . 6.) Taxes

I am not sure your interpretation that assets held jointly avoids debts is correct. Otherwise people would put everything in joint accounts to avoid taxes.

In Maryland, for the probate part of the estate (the will), get a load of the following questions you must answer (under penalties of perjury) on the information report:

At the time of death did the decedent have any interest as a joint owner . . . including accounts in a credit union, bank or other financial institution?

At the time of death did the decedent have any interest in any property outside of Maryland . . . in the decedent's own name or as a tenant in common?

Within two years of death did decedent make any transfer of any property . . . including any transfer that resulted in joint ownership of property?

Did the decedent have any interest in any annuity or other public or private employee pension or benefit plan. . .?

You can save yourself money on attorney fees if you go to the library and read the state code. The forms will be listed under "rules", and will give you a good indication of what you can and cannot do.

[Zee]

The will does is not the only blueprint for determining what the executor has to do. The state law determines that, although most wills inlcude what the executor can do. If there is a conflict between the two the state law prevails. If there are not enough assets to pay the debts in Maryland this is the order in what gets paid: 1.) Register of Wills, 2.) Cost of administration (attorney fees) 3.) Funeral expenses. . . 6.) Taxes

I am not sure your interpretation that assets held jointly avoids debts is correct. Otherwise people would put everything in joint accounts to avoid taxes.

In Maryland, for the probate part of the estate (the will), get a load of the following questions you must answer (under penalties of perjury) on the information report:

At the time of death did the decedent have any interest as a joint owner . . . including accounts in a credit union, bank or other financial institution?

At the time of death did the decedent have any interest in any property outside of Maryland . . . in the decedent's own name or as a tenant in common?

Within two years of death did decedent make any transfer of any property . . . including any transfer that resulted in joint ownership of property?

Did the decedent have any interest in any annuity or other public or private employee pension or benefit plan. . .?

You can save yourself money on attorney fees if you go to the library and read the state code. The forms will be listed under "rules", and will give you a good indication of what you can and cannot do.

I don't remember anyone discussing jointly held assets in this thread, or did I miss something? We did discuss IRA's with designated beneficiaries. Are you saying such IRA's are also considered jointly held assets, like a checking or savings account with joint ownership?
I wouldn't think so.

[ED SMITH]

If the house is in probate, it will be the probate judge who decides who gets what,notwithstanding the intent of the will. Any one including the IRS can put in a claim during probate. In this case, he could order it sold to satisfy any tax claims.

[Kennyabc]

Avoid Probate - Not Taxes

I thought of this after I replied. Joint ownership avoids probate not taxes. Ditto with life insurance with designated beneficiaries. Life insurance proceeds go directly to the beneficiaries, but from what I have read is still taxable.

Did the IRA's (banks or mutual funds, etc.) send any statements to the heirs? I am about to inherit part of my mother's trust. The bank sent me a K-1; I pay taxes on the dividends by adding them to my 1040. They sent the K-1 to me in February, the tax is for 2007 the year my mother died. The bank filed a 1041 for the trust, and it appears paid the capital gains taxes directly to the IRS. I will get a copy of the 1041, to see exacly what they filed.

Trust agreements generally function independently from the probate part. However, the attorney that drew up the will and trust stated there would not be any difference in taxes whether the whole estate went through probate or just part of it. The problem I have is that my mother's will dumps the residue of her estate into the trust. The bank was going to distribute my share within 90 days after I mailed the death ceftificate to them. My attorney advised me not to sign the form since more money was going to the trust. So the will has held up the final distribution of the trust. If you have a trust, it makes more sence to me not to have the pour over clause in the will. However, our family situation is complicated, so there might have been a good reason to do it this way.

[Kennyabc]

SSN Ties Everything Together

Somewhere else in this forum someone stated that the decedent's SSN links everything in their estate together. Even if part of the estate goes through a probate will and another part by IRA's, the IRS will know everything that is going on. See the bottom of page three of the 1041 instructions. It states that the IRA beneficiaries have to pay part of the distribution to their gross income. Unfortunately, I have never inherited a IRA or life insurance policy so I don't have direct experience. It seems to me the company would be required to report the proceeds to the IRS.

For my mother's trust, the bank sent me a statement reflecting everything that went on before the date of death. This is done by computer. They enter the date of death and everything is separated before and after the date of death. This includes dividends, capital gains, etc. This information is reported to the IRS. I just got her refund check today, so the information sent to the IRS matched what I reported on her final 1040.

The IRS runs their computer and so do the banks and brokerage houses. The two better match. I don't see how anyone could avoid paying taxes for a deceased person.