A New Wrinkle

[Christian]

Hardly a tax season goes by when I don't encounter something new. An older client passed on in 2018. She was indigent and on Medicaid in a home. She had a lady who had power of attorney who was selected by the home. Upon passing on the power of attorney of course had no more effect. She had executed a will naming the person with power of attorney as her executor. The attorney who drew up the will informed her there was no need for probate as the client had few assets. He further advised that since there was no one who could sign the return there was no need to file one. She had two pensions and social security income which caused her to exceed the filing threshold and showed a balance due of $608.00 which was eliminated after deducting her medical expenses. I had asked her to consult him before I would prepare a return but went ahead and did a workup for myself. I am wondering if the IRS will not send her a letter in two years about this. What do y'all think? The pensions had no withholding federal or state.

[jklcpa]

Attorney is wrong. Executor can sign the return as a representative of the estate. 

It's possible the IRS would create a SFR and there may be no assets in the estate to collect from.  Would the standard deduction + the extra for being over 65 be enough to also eliminate tax?  If not, I'd file a return with the medical deductions to eliminate the tax bill. 

Now, what about the state return?

[Christian]

She had an income of $19,500 or thereabouts. Her expenses in the home were $28,000 plus so there is no tax due. The attorney stated as the will was not probated her appointment as executor was not recognized by the court so no one to sign the return. No state tax due. My thought was they might send a notice to the lady who held the power of attorney two years out. If so she can give me a call as I will keep the return I worked up.

[TAXMAN]

Well then, who went to courthouse and recorded the will? I agree keep the workup as it may come back.

[Lee B]

If a refund is due, you can file a tax return without the will being probated and without a court appointed executor.

My wife signed her mother's tax return who passed in early 2018 with this exact scenario.

Suggest you review instructions for Form 1310.

[Max W]

Form 56 needs to be filed so executor can act as fiduciary.

[Max W]

Never trust what an attorney, stock broker, or RE agent says about taxes.   Always verify!

[Roberts]

Sorry, thought this title had something to do with my forehead.

 

 

Is 1310 really the applicable form since no refund is being requested? The Personal Representative / executor / their attorney can sign a final tax return and the courts don't have to appoint one. The attorney should want to cover his rear that no tax liability is due before any final disbursements are made. As long as no refund is requested, I've never had the IRS question it. I'd save all your work and make notes. A tax return really should be filed IMO.

[Catherine]

5 hours ago, Max W said:

Never trust what an attorney, stock broker, or RE agent says about taxes.   Always verify!

It's almost that you CAN trust that whatever those three categories say, it is wrong! 

[SaraEA]

I was working on an estate return today in which the estate sold the decedent's home (says so right on the HUD).  A 1099S with the estate EIN was prepared by the attorney and then negated because he realized the decedent had owned and lived in the home for 2 of the past five years.  He actually had the beneficiaries initial the form that it had met the 2-5 year requirement.  Ummmmm.....the decedent did not sell the home, the estate did, and neither the estate nor the beneficiaries lived in it.  I put it on the estate return even without the 1099S.  The state they live in is rabid about checking public records of real estate transactions and is sure to send a bill in the distant future if it doesn't appear on the 1041 regardless of what the attorney thinks.