Can an attorney help with estate administration and tax issues?

On behalf of Scaringi Law posted in Estate Planning on Saturday, November 28, 2015.

In a recent post, we provided several tips when filing an estate tax return, including the need to utilize the new portability rules. We also mentioned that the administrator of an estate is often the individual expected to provide the valuation of the estate’s assets, including the reporting of any income of the estate. Although these principles may seem straightforward, a recent Tax Court decision illustrates the potential complexities that may arise regarding an estate tax return.

Specifically, the case raised the question of whether federal income tax refunds that had not yet been paid to a decedent should have been listed as assets of the estate.

According to the court documents, the estate did not include the refunds on the Form 706 based on a state law definition of property. According to state legal precedent, property could not be taxed unless it existed on the date of the tax assessment. Property that was a possibility or expectancy did not fit that definition, according to the estate administrator's argument. Based on that case law precedent, the estate determined that the refund requests were not actual property until the IRS approved them. However, the U.S. Tax Court disagreed, ruling the refunds were property interests that should have been listed on the Form 706 federal estate tax return.

Although it may be tempting to have an accountant prepare an estate tax return, this example illustrates how the experience and skills of an estate planning law firm can be of value. In addition, a law firm can troubleshoot other legal issues that might arise in the administration of an estate.

Source: wealthmanagement.com, “The value of overpayments is includible in a decedent’s gross estate,” Dawn S. Markowitz, Nov. 25, 2015