Hunt & Associates P.C.

Executor of Estate Found Personally Liable to IRS for Decedent’s Unpaid Taxes

Gold dollar signsBenjamin Franklin once observed “in this world, nothing can be said to be certain, except death and taxes.”  For those who doubt Franklin’s sagacity in that regard, consider the recent case of Marci McNicol.  A federal court found her personally liable to the Internal Revenue Services to the tune of $125,000.00 with respect to taxes owed by her late husband.  Here’s what happened.

On his death, in addition to their four minor children, McNicol’s husband left her with an unpaid tax bill of $340,000.00.  Because the unpaid taxes were more than the value of the estate’s assets, the estate was insolvent.  In such circumstances, federal law[1] gives priority to the government’s claims against the estate.  In other words, when the decedent’s estate isn’t sufficient to pay all debts, Uncle Sam gets paid first.  Ms. McNicol ignored the government’s priority claim.  Instead, after being appointed the personal representative of her husband’s estate and already knowing of the unpaid tax bill, she proceeded to disburse the estate’s assets to others she apparently considered more entitled, herself included.  Bad move.  Eventually, the IRS came calling and when it did, it escorted her all the way to the courthouse.  There, the court ruled she was liable to the IRS for the entire unpaid tax bill in her capacity as personal representative.  As an extra bonus, the court found her to be personally liable to the extent of the $125,000.00 in assets she had disbursed to herself.

Remember: The personal representative of an estate owes a fiduciary duty not only to the decedent’s heirs, but also to the creditors of the estate.  The consequences of ignoring that duty can be oh so painful. Don’t just take our word on it, ask Ms. McNicol.

© 2/27/2017 Charles A. Ford of Hunt & Associates, P.C.  All rights reserved.

[1] 31 U.S. Code Section 3713(a)(1)(B).

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