[WSBAPT] Personal Rep and Income Taxes

[Philip N. Jones]

We all need to work hand-in-glove with the family's tax return preparer for the entire duration of the probate or of the trust administration.  If the decedent's preparer will be continuing to work with the PR/trustee, that is ideal, and the preparer usually knows the status of prior returns and whether any of the prior returns have been audited or other problems developed.  I like to call the preparer (with the client's permission) at the outset of the probate and establish that I will be preparing the federal and state estate tax returns, and the preparer will prepare the final 1040 and all of the 1041s for the duration of the probate.  But we all need to have a basic understanding of the fiduciary income tax, because so many decisions made during the probate or trust administration impact the fiduciary income tax and vice versa.  We cannot fully separate the tax issues from the estate/trust issues.  If the PR or trustee closes the probate or concludes the trust administration and distributes the assets without making sure that all of the income taxes (both 1040 and 1041) have been paid, the PR/trustee will incur fiduciary liability (personal liability) for the tax, and the beneficiaries will incur transferee liability.  And there are things we might do during the estate/trust administration that could trigger huge income tax liabilities.  And those liabilities are often avoidable.
If you have the materials from the November 2017 Seattle Estate Planning Council annual seminar, those materials include a lengthy chapter on the fiduciary income tax, with lots of references to Washington law.
Phil Jones

Philip N. Jones
Duffy Kekel LLP
900 S.W. Fifth Ave. Suite 2500
Portland, OR 97204
pjones at duffykekel.com<mailto:pjones at duffykekel.com>
(503) 226-1371 - office
(503) 853-1482 - cell
(503) 226-3574 - fax

From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Paul Neumiller
Sent: Tuesday, September 13, 2022 3:24 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Personal Rep and Income Taxes

"Hi, thank you using me as your attorney to help guide you through the probate process.  But I am an attorney and not an accountant, bookkeeper, or certified public accountant.  You will need to hire an accountant to assist you in finalizing the decedent's taxes.  Let me know what you guys come up with."    I also put this in writing in my standard PR duties letter to the PR right after probate is opened: "Additionally, you are responsible for filing Decedent's final individual income tax return for the year of the date of death.  You may be asked to provide the IRS with Form 56 (Notice Concerning Fiduciary Relationship) to establish that you are acting as the Decedent's personal representative.  If you would like, I will work with you and your accountant on the preparation of this return."


[cid:image001.jpg at 01D8C786.A0FD2780]

IMPORTANT NOTICE:  This e-mail message is intended to be received only by persons entitled to receive the confidential information it may contain. E-mail messages to clients of Paul A. Neumiller presumptively contain information that is confidential and legally privileged; e-mail messages to non-clients are normally confidential and may also be legally privileged. Please do not read, copy, forward or store this message unless you are the intended recipient of it. If you have received this message in error, please forward it back to the sender and delete it completely from your computer system.

E-mail communication on the Internet may NOT be secure. There is a risk that this confidential communication may be intercepted illegally. There may also be a risk of waiving attorney-client and/or work-product privileges that may attach to this communication. DO NOT forward this message to a third party. If you have any questions regarding this notice, please contact the sender.


From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Diane J. Kiepe
Sent: Tuesday, September 13, 2022 3:11 PM
To: 'WSBA Probate & Trust Listserv' <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: [WSBAPT] Personal Rep and Income Taxes

Hello All,

I know this conversation went around before but I'm hoping one or two (or more) of you would share your process in a probate in dealing with income taxes for the decedent; in particular how to find out if there are any outstanding taxes owed for prior years.

Thanks in advance.

Diane J. Kiepe

Diane J. Kiepe
Douglas Eden
717 W. Sprague Ave.
Suite 1500
Spokane, WA  99201
djkiepe at depdslaw.com<mailto:djkiepe at depdslaw.com>
509-455-5300

-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mailman.fsr.com/pipermail/wsbapt/attachments/20220913/0f83e439/attachment.html>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: image001.jpg
Type: image/jpeg
Size: 14264 bytes
Desc: image001.jpg
URL: <http://mailman.fsr.com/pipermail/wsbapt/attachments/20220913/0f83e439/image001.jpg>