[WSBAPT] Unpaid Taxes and Fiduciary Duty to Beneficiaries

Fri Nov 16 11:25:41 PST 2018

A PR can AVOID taxes in any legal manner.  “Anyone may so arrange his
affairs so that his taxes shall be as low as possible. He is not bound to
choose that pattern which best pays the treasury. There is not even a
patriotic duty to increase one's taxes.” Judge Learned Hand.  However,
failing to file a tax return that is legally required would be EVADING
taxes, or close to it, which is a federal crime.  Does the PR want to take
a chance on being charged with a felony?

Sincerely,

*Chris J. Moore*
Christopher J. Moore, JD, CPA - Inactive, AEP®, EPLS*
Creason, Moore, Dokken & Geidl, PLLC
Lawyers
1219 Idaho Street,
<https://www.google.com/maps/place/1219+Idaho+St,+Lewiston,+ID+83501/@46.4170263,-117.0192992,17z/data=!3m1!4b1!4m5!3m4!1s0x54a0354b7ccf3e63:0xfee7451c99c186e8!8m2!3d46.4170263!4d-117.0171105>

Lewiston, Idaho 83501
<https://www.google.com/maps/place/1219+Idaho+St,+Lewiston,+ID+83501/@46.4170263,-117.0192992,17z/data=!3m1!4b1!4m5!3m4!1s0x54a0354b7ccf3e63:0xfee7451c99c186e8!8m2!3d46.4170263!4d-117.0171105>
Phone: 208-743-1516; Fax: 208-746-2231
Website: www.cmd-law.com

*Certified as an Estate Planning Law Specialist by the Estate Law
Specialist Board, Inc., the only estate planning certification entity
approved by the ABA and the Idaho State Bar Association.
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*From:* wsbapt-bounces at lists.wsbarppt.com [mailto:
wsbapt-bounces at lists.wsbarppt.com] *On Behalf Of *Josh Grant
*Sent:* Friday, November 16, 2018 10:52 AM
*To:* WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
*Subject:* Re: [WSBAPT] Unpaid Taxes and Fiduciary Duty to Beneficiaries

I have thought that a PR can avoid taxes if there is a legal way to do
that, but if not, the obligation of a PR is to pay all debts before assets
are distributed, but certainly to pay them out of available assets.

*Joshua F. Grant*
[image: advocates]
P. O. Box 619
Wilbur, WA 99185
509 647 5578

*From:* James W. Spencer <jamess at brothershenderson.com>

*Sent:* Friday, November 16, 2018 10:35 AM

*To:* WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>

*Subject:* [WSBAPT] Unpaid Taxes and Fiduciary Duty to Beneficiaries

Greetings Listmates:

I have a… um, theoretical… situation.

The facts are pretty simple (and likely quite common): Decedent dies in
2018. During the administration of Decedent’s estate, it is discovered that
Decedent hasn’t filed annual income tax returns, likely for a decade or
two. This is probably not really an issue, as Decedent apparently didn’t
work and had no W-2 income. However, in 2016, Decedent sold a home, and the
proceeds are well outside of the $250,000 individual capital gains tax
exemption for the sale of a primary residence. Unpaid capital gains taxes
are likely in the $75,000 - $100,000 range (depending on the final
determination of the tax basis in the residence). Estate accountant is
advising PR that the PR should file a tax return for 2016 and pay the
capital gains tax. While beneficiaries have already received some notable
portion of the estate, this will (more than) eat up all remaining funds in
the estate, leaving nothing else for the beneficiaries.

I would love some opinions on the nexus between the PR’s fiduciary duties
to the estate’s beneficiaries and the PR’s responsibility to properly
administer the estate, including dealing with taxes. The underlying
questions is whether it a breach of fiduciary duty for the PR to file a tax
return that will deny the beneficiaries significant funds where there is a
very real possibility that the IRS will never come after those taxes if no
return is filed.

I have some opinions on this, but would really appreciate some feedback
from the hivemind.

Thanks,

James

James W. Spencer

Attorney at Law

Brothers & Henderson, P.S.

2722 Eastlake Avenue East, Suite 200

Seattle, Washington 98102

Phone: (206) 324-4300 x106

Fax: (206) 324-3106

e-mail:  jamess at brothershenderson.com

www.brothershenderson.com

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