[WSBAPT] Unpaid Taxes and Fiduciary Duty to Beneficiaries

Fri Nov 16 12:56:58 PST 2018

All:

Excellent feedback. The prevailing opinion was also mine, though I appreciate the citations which are very helpful. Thank you everyone that responded.

I hope everyone has a wonderful Thanksgiving.

Best wishes,

James W. Spencer

Brothers & Henderson, P.S.

2722 Eastlake Avenue East, Suite 200

Seattle, Washington 98102

Phone: (206) 324-4300 x106

e-mail:  jamess at brothershenderson.com<mailto:jamess at brothershenderson.com>

www.brothershenderson.com<http://www.brothershenderson.com/>

The information transmitted in this e-mail message and attachments is attorney-client information, is privileged or confidential material and is intended only for the use of the individual or entity named above. If you have received this transmission in error, immediately notify the sender by reply e-mail and permanently delete this transmission and all copies including attachments.

From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Chris Moore
Sent: Friday, November 16, 2018 11:26 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Unpaid Taxes and Fiduciary Duty to Beneficiaries

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<http://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> [mailto: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<mailto: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

P. O. Box 619
Wilbur, WA 99185
509 647 5578

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

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

To: WSBA Probate & Trust Listserv<mailto: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<mailto:jamess at brothershenderson.com>

www.brothershenderson.com<http://www.brothershenderson.com/>

The information transmitted in this e-mail message and attachments is attorney-client information, is privileged or confidential material and is intended only for the use of the individual or entity named above. You are hereby notified that any disclosure, copying, distribution, review by or taking of any action in reliance on the contents of this e-mail information by unauthorized persons is strictly prohibited. All personal messages are solely the views of the sender and are not to be attributed to Brothers & Henderson, P.S. If you have received this transmission in error, immediately notify the sender by reply e-mail and permanently delete this transmission and all copies including attachments.

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