Minimizing a personal representative's personal liability to pay taxes: part 1 describes tax returns, tax payment obligations, and ways in which a PR can be held personally liable for failing to adhere to the applicable federal and state requirements.

A Personal representative ("PR") of a Florida probate estate must be fully cognizant of his or her obligations to file tax returns and pay taxes on behalf of the decedent and the decedent's estate. These obligations are numerous and include returns for income, estate, generation-skipping, gift and intangible taxes. A failure to file these tax returns and to pay these taxes could result in the PR being personally liable to the Internal Revenue Service or to the Florida Department of Revenue for any unpaid taxes, penalties, and interest. This personal liability can be asserted and collected by the federal and state government many years after the estate is closed. Additionally, the Florida Probate Rules specify that, before making complete distribution of estate assets to beneficiaries, the PR is obligated to settle all creditor claims and to pay or make provision for taxes and expenses of administration. (1) Even if the PR is not personally liable to the IRS or the FDOR, the PR could be personally liable to the beneficiaries through a surcharge action based on a loss suffered because of a failure to pay taxes when due.

Part I of this article describes these tax returns and tax payment obligations and discusses the ways in which a PR can be held personally liable for failing to adhere to the applicable federal and state requirements. Part II suggests a course of action for a PR to minimize the risk of being personally liable for these taxes.

Federal Tax Obligations in General

Federal law requires the PR to file the decedent's outstanding federal income and gift tax returns. (2) Depending on the size of the estate and the amount of the decedent's lifetime gifts, the PR may also be required to file a federal estate tax return. (3) The PR is responsible for paying the federal estate tax, even if a part...

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