Personal Liability of the Fiduciary for Debts to the U.S. Government

• Author: Seymour Goldberg
• Profession: Senior partner in the law firm of Goldberg & Goldberg, P.C., in Woodbury, New York
• Pages: 10-11

10

PERSONAL LIABILITY

OF THE FIDUCIARY FOR

DEBTS TO THE U.S.

GOVERNMENT

In the event that the executor of an estate is aware of unpaid IRS

penalties with respect to IRA issues, then the executor may face sig-

nificant personal liabilities in connection with the administration of

an estate.

This can happen because t here is no statute of limitations with

respect to an IR A excise tax penalty if Form 5329 is not filed with the

IRS.

In the event that the executor dist ributes the probate assets to

beneficiaries of the estate knowing that there may be IRA penalties

or unpaid federal tax liabilities coming down the road with respect to

transactions that were attributable to the decedent prior to the dece-

dent’s death, the executor may have personal liability to t he IRS. This

can happen if the estate is rendered insolvent by the dist ribution of

the probate assets to the estate beneficiaries. This could also happen

if the executor of the estate pays non-priority debts of f before the

IRS.

According to the IRS as well a s the courts, the executor may be held

personally liable to the government if the executor had either actual

knowledge of the liability or notice of such facts as would put a reason-

ably prudent person on notice as to the existence of the tax debt before

making non-priority distributions or pay ments to other than the U.S.

government. This is only a problem if the est ate is rendered insolvent by

the executor’s actions.

The authority for the U.S. government to hold the executor person-

ally liable is found in 31 U.S.C. §3713.

goL88517_01_c01_p001-166.indd 10goL88517_01_c01_p001-166.indd 10 3/12/13 8:27 AM3/12/13 8:27 AM