Considering Serving as Executor of an Estate Subject to a Tax Lien?

A recent case from the Southern District of Indiana might make you think twice.

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Executors and the Decedent’s Unpaid Taxes: A Trap for the Unwary

An executor is normally not personally liable for the debts of a decedent. However, a special rule applies to federal taxes. Outside the Tax Code, in an obscure corner of federal law, we find the following: A representative of a person or an estate (except a trustee acting under title 11) paying any part of a debt of the person or estate before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government. For this purpose, the term “unpaid claims” is intentionally broad, covering income tax (individual or estate), estate tax, gift tax, and the civil penalty associated with unpaid payroll taxes. Essentially, the government is saying “we get paid […]

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