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IRS goes after beneficiaries when estates don’t pay taxes

On Behalf of | Aug 14, 2013 | Inheritance And Estate Tax |

New Jersey residents might be interested to hear that when there are unpaid taxes on an estate, this can end negatively for beneficiaries. According to a recent decision rendered by the U.S. District Court for the Southern District of Florida in one case, an inter vivos trust contained almost $5 million in stocks, and an IRA was found to contain almost $4 million. The estate tax was supposed to be paid out of the inter vivos trust in this case, but the IRS is reportedly trying to get one beneficiary’s IRA distribution to cover part of the tax.

Essentially, the ruling mandated that if an individual acquires assets directly as the result of someone’s death, he or she might be held responsible for some of the estate tax. Therefore, it might be a good idea for all assets to be concentrated so that estate tax and other expenses and debts are able to be paid. Then, the balance can be distributed, and beneficiaries who receive property outside of probate won’t have to be subjected to surprise estate tax assessments.

Estate planning is an important type of financial planning for people who want to ensure that their estates are divided up among their friends and family as they wish them to be. However, there are various ways to divide up an estate as well as various types of wills that people can choose to get.

Probate lawyers might be able to assist people with the estate planning process. They might be able to advise them as to which kind of will best suits their needs and help them draw up clear, concise documents that ensure that their wishes will be carried out after their deaths. They might also help them ensure that they have considered every aspect of the planning process, such as any estate taxes that might apply.

Source: Forbes, “IRS To Collect Estate Tax From Beneficiary After More Than A Decade“, Peter J Reilly, August 07, 2013