IRS Look Back for Trust Assets

[Randall]

Does the IRS have a look back period for assets put in a trust.  Similar to Medicaid.  Just curious.  Deceased person has back IRS taxes due.  Residence put in trust.  Sold by trustee, wants to distribute money to two beneficiaries, son and daughter.  Are these proceeds independent of the deceased person’s debt to IRS?

[Sara EA]

What kind of trust?  If revocable the house will be part of the estate and IRS will have claim to its piece.  Irrevocable, it depends.  Did the deceased have a retained life estate? Regardless of whether it was written or unwritten, if he lived in the house and paid the bills the house is part of the estate.  Did he put the house into trust after the IRS debt was noticed?  Did it go to the trust after death?  In either case the IRS may have claim on it. 

[Randall]

13 hours ago, Sara EA said:

What kind of trust?  If revocable the house will be part of the estate and IRS will have claim to its piece.  Irrevocable, it depends.  Did the deceased have a retained life estate? Regardless of whether it was written or unwritten, if he lived in the house and paid the bills the house is part of the estate.  Did he put the house into trust after the IRS debt was noticed?  Did it go to the trust after death?  In either case the IRS may have claim on it. 

Interesting.  Thanks for the comments. 

[Randall]

Sara EA, any references I can go to and look up more on this?

 

[DANRVAN]

6 hours ago, Randall said:

If revocable the house will be part of the estate and IRS will have claim to its

Sara EA is correct, IRS can levy any asset that is part of decedent's estate.

[DANRVAN]

7 hours ago, Randall said:

any references I can go

https://www.irs.gov/irm/part5/irm_05-005-003#idm140006924976240

5.5.3.6 (09-17-2020)

Notice of Federal Tax Lien

"..................If the NFTL is recorded on an assessment made before death, it attaches to assets owned by the taxpayer and follows those assets into the estate or the hands of the transferee. The Service's priority position with respect to those assets, is determined based on the date of the filing of the NFTL before the taxpayer's death".

"If the NFTL is recorded on a post-death assessment, it would not reach any property that passed to heirs automatically at the time of death (non-probate property), but it would reach any probate property in the taxpayer's "estate" at the time of the assessment"

[DANRVAN]

On 10/27/2021 at 9:53 AM, Randall said:

Are these proceeds independent of the deceased person’s debt to IRS?

 

Depending on fact and circumstances, I would probably get a legal opinion on that.

[DANRVAN]

On 10/27/2021 at 9:53 AM, Randall said:

Sold by trustee, wants to distribute money to two beneficiaries,

I believe he as a duty to pay off debt of decedent including back taxes regardless.

[Sara EA]

Read the trust document.  Ask questions of the trustee (the ones in my first post).  Rather than have the potential tax liability hanging over them, maybe suggest they just pay the tax bill and distribute the remainder.