After a parent passes away, you must confront the complex and emotional upheaval of your loss. However, what if you discover an unwelcome surprise – that your deceased parent still owes back taxes? In most cases, you will not be held liable for your parent’s tax debt, but read on for more information and exceptions to this general rule.
An estate includes cash, property, real estate, savings, investments and other tangible and intangible assets. The estate is also generally responsible to pay off the tax obligations of the deceased. In addition, an administrator or executor of the estate, usually assigned by the deceased before death, is responsible to file tax returns and pay all taxes. If your parent did not assign an executor, the probate court will appoint one.
If your parent owed the IRS taxes before his or her death, the IRS can continue to send you notices and harass you after your parent dies, using all of its significant resources to collect your parent’s debt.
Satisfying a Prior Tax Debt
In some cases, your parent might leave an inheritance or an estate to the family. If he or she owed back taxes, the IRS can put a lien against the estate. The IRS can seize these assets in order to pay off the remaining tax bill. If a family member spent those monies, leaving the estate without funds to meet its tax obligations, the IRS might take further legal action and pursue that person to secure the funds. The executor cannot distribute the proceeds from the estate until the tax obligations are satisfied.
Legally, the IRS does not even need to inform heirs or the executor that it has put a lien against the estate. Even if your parent established a trust, the lien will still be in effect.
Dealing with a Parent’s Back Taxes
It’s confusing enough to deal with your own tax matters, let alone handle a deceased parent’s tax liability. We can help you take action to resolve these tax issues. Call our experienced team at 720-398-6088 to assess your options and set up a strategic plan to deal with this dilemma.