My Job as an Estate Executor is almost over!!!

[swakyaby]

It also might indicate the IRS has not yet gotten to the amended 2019 tax returns.

 

[ncbill]

Update: After a 3-way call between DB, an IRS agent, and our estate attorney who prepared the tax returns, it was determined the $50K was applied to the original 2019 tax return instead of the 2019 amended tax return. So even though it would have meant a $50K overpayment on the original return, the IRS zeroed in on the presumptive underpayment of the amended return, and added 2 1/2 years of late fees and penalties. We’re glad this seems resolved (for now), because otherwise it would have meant trying to claw back $34K from 4 beneficiaries.

Another reason I'm grateful my umbrella insurance covers volunteer activities.

I'm fortunate that the last relatives for whom I handled their affairs were poor enough that I'll happily shred everything 3 years after filing.

 

[SecondCor521]

@audreyh1, I'm glad you're through the majority of it and can enjoy yourself some more!

This is only an issue for estates that have a federal estate tax liability. In 2026 more estates will have this issue unless the gov't takes action.

How would the IRS know which estates have a federal estate tax liability and which do not?

 

[socca]

How would the IRS know which estates have a federal estate tax liability and which do not?

This is primarily a title insurance company issue. A title insurance company won't issue a title insurance policy if the title is clouded by an IRS tax lien. Since an IRS estate tax lien on property owned by the decedent is automatic (not the fault of the executor), the solution seems to be for the title insurance company to demand the escrow of the property sale proceeds pending the IRS issuance of the estate tax closing letter.

The escrow is a hassle for the executor, closing agent, and buyer. At the particular closing I attended as seller, the buyer was alarmed that they weren't receiving clear title to the property at closing. The buyer's attorney tried to put them at ease, with only partial success. The deal went through anyway, thank goodness.

An executor could lie to a title insurance company if directly asked whether the estate has an estate tax liability and thus avoid the escrow of the property sale proceeds. I didn't find this approach particularly attractive and didn't do it.

P.S. If you google this topic there are some interesting articles on the subject.

 

[SecondCor521]

This is primarily a title insurance company issue. A title insurance company won't issue a title insurance policy if the title is clouded by an IRS tax lien. Since an IRS estate tax lien on property owned by the decedent is automatic (not the fault of the executor), the solution seems to be for the title insurance company to demand the escrow of the property sale proceeds pending the IRS issuance of the estate tax closing letter.

The escrow is a hassle for the executor, closing agent, and buyer. At the particular closing I attended as seller, the buyer was alarmed that they weren't receiving clear title to the property at closing. The buyer's attorney tried to put them at ease, with only partial success. The deal went through anyway, thank goodness.

An executor could lie to a title insurance company if directly asked whether the estate has an estate tax liability and thus avoid the escrow of the property sale proceeds. I didn't find this approach particularly attractive and didn't do it.

P.S. If you google this topic there are some interesting articles on the subject.

Thanks. I did Google and find the answer to my question - the IRS applies a lien to every single estate, and it's cleared by filing a proper estate tax return and paying any estate tax due, or making a petition for discharge:

https://www.irs.gov/businesses/smal...property-that-is-part-of-the-decedents-estate

 

[socca]

Thanks. I did Google and find the answer to my question - the IRS applies a lien to every single estate, and it's cleared by filing a proper estate tax return and paying any estate tax due, or making a petition for discharge:

https://www.irs.gov/businesses/smal...property-that-is-part-of-the-decedents-estate

Yep - exactly.

If I had lied to the title insurance company to avoid escrow, my lie would have become part of the public record forever. Thanks, but no thanks.

 

[CRLLS]

Interesting about the IRS tax lien. DW's MIL passed last August. Her house was held in a Living Trust. DW was (still is) co-trustee and co-executor. She and her sister had an attorney directing them. The house was sold by the trust, 4 months later in December. MIL's personal and estate (trust?) taxes were filed in Mar of this year. She doesn't recall seeing anything regarding a tax lien, and the sale went thru without a hitch.

 

[socca]

... MIL's personal and estate (trust?) taxes were filed in Mar of this year. She doesn't recall seeing anything regarding a tax lien, and the sale went thru without a hitch.

Just to be clear, this is an estate tax issue only (Form 706), not an income tax issue (Form 1041).

 

[CRLLS]

Just to be clear, this is an estate tax issue only (Form 706), not an income tax issue (Form 1041).

I do get it. The part that gets me confused is that there was no "automatic lien" put on the MIL's home held in her Living trust as has been mentioned. The home was sold almost exactly 3 months after her passing. There was no request to the IRS to release any lien, to my knowledge.

 

[socca]

I do get it. The part that gets me confused is that there was no "automatic lien" put on the MIL's home held in her Living trust as has been mentioned. The home was sold almost exactly 3 months after her passing. There was no request to the IRS to release any lien, to my knowledge.

The IRS doesn't actually file the paperwork with a county recorder to place an estate tax lien on property (as someone pointed out above, how does the IRS know which estates have an estate tax liability until a Form 706 shows up, or doesn't?)

The title insurance company files paperwork with the county recorder describing the property sale proceeds escrow, presumably to protect itself from an angry buyer if the executor fails to satisfy the IRS regarding the estate's tax obligation.

The lesson for an executor of an estate with an estate tax liability is to find a title insurance company that doesn't ask inconvenient questions . However, sometimes this is out of the executor's control if the buyer selects the closing agent and the closing agent selects the buyer's title insurance company.

Hope this helps!

 

[ncbill]

Just to be clear, this is an estate tax issue only (Form 706), not an income tax issue (Form 1041).

Which most of us will never have to worry about.

IIRC, in 2019 fewer than 7,000 estates here in the USA had to file Form 706.

 

[CRLLS]

Got it. Thanks. I was a bit worried that DW had missed something. Of course there was an attorney reviewing and directing along the way to prevent mistakes.

 

[Montecfo]

Update: After a 3-way call between DB, an IRS agent, and our estate attorney who prepared the tax returns, it was determined the $50K was applied to the original 2019 tax return instead of the 2019 amended tax return. So even though it would have meant a $50K overpayment on the original return, the IRS zeroed in on the presumptive underpayment of the amended return, and added 2 1/2 years of late fees and penalties. We’re glad this seems resolved (for now), because otherwise it would have meant trying to claw back $34K from 4 beneficiaries.

That is exactly what IRS does.

 

[Montecfo]

Audrey,

Nice view in the Smokies!

Congrats on the estate and well done on getting your Dad to change the will. I am sure that is a major blessing for your siblings, as is your work on the estate!

I know it was a labor of love but all the same.

 

[BubbaChris]

Audrey,

Congratulations and thank you for what you've shared. It sounds like a challenging journey managed well, by someone who was keeping everyone's needs close to her heart.

I feel like I've been in a version of executorship for almost 8 years now. I took the reigns and role when my father passed in 2014, then managed my mother's finances until she passed in early 2020. I'm still trustee for my sister's portion of the estate, as she sorts out a 10 year old IRS issue tied to her now ex-husband. Every time she asks for cash, I remind her it's her money. Mom's 2020 tax refund is still pending while the IRS just asked for another copy of the trust's amended 2020 return.

The work is worth it as my portion of the estate kicked us into ER.

Best regards,
Chris

 

[ImThinkin2019]

Oh, I see you are waiting for a potential audit.

I’m not going to worry about it. The estate has had almost no net income so far, and any taxable proceeds are distributed to the heirs.

Last week I got a tax refund resulting from the IRS review of my brother's 2019 tax return. That's the last year he worked before he passed.

Based on this it looks like the IRS is right now about 2 years behind.

 

[Montecfo]

Last week I got a tax refund resulting from the IRS review of my brother's 2019 tax return. That's the last year he worked before he passed.



Based on this it looks like the IRS is right now about 2 years behind.

I would say they are on schedule. 6 months before statute tolls.

This is no different from history per my experience.

 

[swakyaby]

Wrong post

 

[audreyh1]

Update:

Whew! Got the estate tax return done with the help of late DF’s tax preparer. Yeah, after Xmas holidays was bogged down a bit gathering all the materials as we had the land sale and distributions to the beneficiaries. Sent out PDFs of the generated K-1s to the beneficiaries. So another big step to wrapping things up. This is marked as the final return as there will be no more estate income.

The tax prep was the last estate expense, so now I have some residual monies to distribute and two accounts to close. A bit more work and probably have to visit in person, but expect DS to be there to visit in the spring.

And in other related developments: so DS took the farmhouse and some surrounding acreage. One DB needed to relocate to be near DSIL’s family, and they closed on a home in December, and the other DB is finally in the process of buying their first home. So everyone got new to them homes!

 

[BubbaChris]

Update:

Whew! Got the estate tax return done with the help of late DF’s tax preparer. Yeah, after Xmas holidays was bogged down a bit gathering all the materials as we had the land sale and distributions to the beneficiaries. Sent out PDFs of the generated K-1s to the beneficiaries. So another big step to wrapping things up. This is marked as the final return as there will be no more estate income.

The tax prep was the last estate expense, so now I have some residual monies to distribute and two accounts to close. A bit more work and probably have to visit in person, but expect DS to be there to visit in the spring.

Congratulations on the big milestone!

Best regards,
Chris

 

[ncbill]

Spent a few years preparing trust & estate returns using Turbo Tax Business, though it's pricey (~$120) compared to their tax software for individuals.

Tried H&R Block's (cheaper) Premium & Business but never could get it to work properly.

The software handled house sales fine & even prepared K-1s for the beneficiaries.

Few (or one) sources of income, though...e.g. often only SS plus 1099-INT & 1099-DIV forms.

Had to prepare the state return manually using a fill-in-the-blanks PDF.

 

[BubbaChris]

Spent a few years preparing trust & estate returns using Turbo Tax Business, though it's pricey (~$120) compared to their tax software for individuals.

Tried H&R Block's (cheaper) Premium & Business but never could get it to work properly.

The software handled house sales fine & even prepared K-1s for the beneficiaries.

Few (or one) sources of income, though...e.g. often only SS plus 1099-INT & 1099-DIV forms.

Had to prepare the state return manually using a fill-in-the-blanks PDF.

I’m having a similar experience using TurboTax for Business. It’s a bit of a challenge, but I get through it. Then I have to use the Utah state’s online form for that part of filing.

I’m having a conversation with my sister later today. She’s the last beneficiary and may be ready now to accept what remains in the account. It would be nice if I could close out the Trust this time next year.

Best regards,
Chris

 

[audreyh1]

DF used a local tax preparer and I continued when I took over his finances as she was used to his situation. I’m sure glad she has been handling the estate returns - a totally different kettle of fish from what we’re used to.

 

[38Chevy454]

Update:

Whew! Got the estate tax return done with the help of late DF’s tax preparer. Yeah, after Xmas holidays was bogged down a bit gathering all the materials as we had the land sale and distributions to the beneficiaries. Sent out PDFs of the generated K-1s to the beneficiaries. So another big step to wrapping things up. This is marked as the final return as there will be no more estate income.

The tax prep was the last estate expense, so now I have some residual monies to distribute and two accounts to close. A bit more work and probably have to visit in person, but expect DS to be there to visit in the spring.

And in other related developments: so DS took the farmhouse and some surrounding acreage. One DB needed to relocate to be near DSIL’s family, and they closed on a home in December, and the other DB is finally in the process of buying their first home. So everyone got new to them homes!

You might want to keep at least one estate account open for a couple years in case of any residual money coming in. It is a lot easier to keep it than to open a new one later due to some residual income showing up, which is usually a smaller amount, but having an account ready makes life easier. In my case I received some money for parent's estate after 10 years! By then i had closed accounts and had to go through process to open new account just to deposit the money. It did take about 3 years for all the normal things to settle out, the 10 year after was an anomaly but is real.

 

[audreyh1]

You might want to keep at least one estate account open for a couple years in case of any residual money coming in. It is a lot easier to keep it than to open a new one later due to some residual income showing up, which is usually a smaller amount, but having an account ready makes life easier. In my case I received some money for parent's estate after 10 years! By then i had closed accounts and had to go through process to open new account just to deposit the money. It did take about 3 years for all the normal things to settle out, the 10 year after was an anomaly but is real.

Thanks. Given how unlikely I think that will be given that all accounts related to DF have been closed for a while now, and I really want to distribute all remaining funds after expenses, so accounts would be at 0 anyway. If it happens - oh well.