September 30, 2022

Volume XII, Number 273

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District of Maryland Rules that Administrators of an Estate Were Personally Liable for Decedent's Unpaid Income Taxes

United States v. Shriner (113 AFTR2d 2014-616 (March 12, 2014))

The District Court for the District of Maryland granted the government's motion for summary judgment and ruled that the administrators of an estate were personally liable for the decedent's unpaid income taxes because the administrators distributed the assets of the estate and rendered it insolvent while there was a debt outstanding.

The decedent failed to file income tax returns for 1997 and the period of 2000 through 2003. When decedent died, the administrators filed income tax returns on behalf of the decedent, and the Service assessed tax liabilities of $27,908 against the Estate. The administrators also filed a Form 2848 (power of attorney) authorizing the Service to send all notices to the law firm handling the estate administration. The Service sent numerous notices regarding the outstanding liabilities to the law firm.

The administrators (who were also beneficiaries) distributed the Estate and left the Estate without sufficient assets to pay the income tax liabilities. The administrators denied that they had actual or constructive knowledge of the debts, but the Court ruled that this denial was insufficient to establish a genuine issue of material fact to defeat the motion for summary judgment. The court discussed Section 3713 of Title 31 of the United States Code, which provides that a representative of a person or an estate will be liable for unpaid claims to the government if (i) they distributed assets out of the estate, (ii) the distribution rendered the estate insolvent, and (iii) the distribution took place after they knew, or should have known, about the government's claim.

In summary, the administrators of an estate can be personally liable for a decedent's debts to the government if they distribute assets out of an estate, rendering the estate insolvent, when they know or should know that there is an outstanding claim against the estate.

© 2022 Proskauer Rose LLP. National Law Review, Volume IV, Number 135
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About this Author

Albert W Gortz, Proskauer Rose Law Firm, Personal Planning Attorney
Partner

Albert W. Gortz is a Partner in the Personal Planning Department and has been with the firm since 1970 and in the Florida office since he opened it in 1977.

561-995-4700
George D Karibjanian, Proskauer Rose Law Firm, Personal Planning Attorney
Senior Counsel

George D. Karibjanian is a Senior Counsel in the Personal Planning Department, resident in the Boca Raton office. George is Board Certified by the Florida Bar in Wills, Trusts & Estates and is a Fellow in the American College of Trust and Estate Counsel.

561-995-4780
David Pratt, Personal Planning Attorney, Proskauer Rose Law Firm,
Partner

David Pratt is a Partner in the Personal Planning Department and head of the Boca Raton office. His practice is dedicated exclusively to the areas of trusts and estates, estate, gift and generation-skipping transfer, fiduciary and individual income taxation and fiduciary litigation. He has extensive experience in estate planning and post-mortem tax planning. He has been asked to serve as an expert witness on several occasions, and has been referred to as a “seasoned trusts and estates lawyer” in a Florida Third District Court of Appeals Opinion

561-995-4777
Mitchell M Gaswirth, Proskauer Rose Law Firm, Tax Attorney
Partner

Mitchell M. Gaswirth is a Partner in the Tax Department. His practice focuses primarily on income, gift and estate tax and related business planning. Mitchell counsels individuals, entrepreneurs and business entities in connection with the various income and other tax issues which arise in sophisticated business transactions.

310-284-5693
Andrew M Katzenstein, Proskauer Law Firm, Personal Planning Attorney
Partner

Andrew M. Katzenstein is a Partner in the Personal Planning Department in the Los Angeles office where he assists high net worth individuals, companies and charitable organizations with all aspects of tax and estate planning. He focuses his practice on tax planning matters, which include estate, gift and generation-skipping tax planning, as well as income tax of trust planning, probate and trust administration matters, resolving disputes between fiduciaries and beneficiaries, and charitable planning

310-284-4553
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