Knowledge Of Executor’s Attorney Imputed To Executor For Claims Act Liability

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Two individuals were appointed as co-executors of an estate. The decedent had not filed income taxes for a number of years. The attorneys prepared tax returns for the missing years, and the IRS assessed taxes against the estate. Without knowledge of the tax liabilities (at least according to the executors), the executors distributed funds out of the estate (coincidentally to the executors). The estate was left with insufficient assets to pay the income tax liabilities of the estate.

Under 31 USC 3713, a fiduciary of an estate is liable for the tax obligations of the estate to the extent it distributes estate funds to lower priority creditors and beneficiaries. In the above case, one of the co-executors sought summary judgment that he was not responsible for the taxes since he did not have knowledge of the tax obligations when the distributions were made out of the estate.

Motion denied, said the District Court – the law firm’s knowledge is imputed to their clients, the co-executors. Further, the court rejected the defense of reliance on erroneous advice of counsel, citing Renda, 709 F.3d 472,484 (5th Cir. 2013) – “We follow the majority of other courts in holding that a representative's actual knowledge of a federal claim is sufficient, notwithstanding that representative's reliance on the erroneous advice of counsel as to how to address the claim.”

U.S. v. SHRINER, ET AL., 113 AFTR 2d 2014-1360, (DC MD), 03/12/2014

Topics:  Actual or Constructive Knowledge, Executors, Fiduciary Duty, Personal Liability, Tax Liability

Published In: Tax Updates, Wills, Trusts, & Estate Planning Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Charles (Chuck) Rubin, Gutter Chaves Josepher Rubin Forman Fleisher P.A. | Attorney Advertising

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Charles (Chuck) Rubin
Gutter Chaves Josepher Rubin Forman Fleisher P.A.

A tax and business attorney who assists clients in preserving & enhancing individual, family &... View Profile »


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