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Fiduciary Liability For Unpaid Taxes — Part II

4. CAN A PERSON BE RESPONSIBLE TO PAY THE DECEDENT’S UNPAID TAXES IF THE PERSON IS NOT THE COURT APPOINTED EXECUTOR?

Answer: Yes. IRC §2203 defines “executor” as the duly appointed executor or administrator, or if none has been appointed, then any person in actual or constructive possession of any property of the decedent.

5. IS THE EXECUTOR PERSONAL LIABLE FOR THE UNPAID TAXES OF THE DECEDENT?

Answer: Except is explained in Part III to-be-published next week, the answer is “no”. The executor is not personally responsible for the decedent’s unpaid taxes. The executor’s duty to pay the decedent’s taxes is in his representative capacity, using the decedent’s estate assets, and not the executor’s personal assets. Thus, if the decedent’s unpaid taxes total $12, and the estate assets total $10, and the executor pays the $10 to the IRS, the executor in his personal capacity is not liable for the $2 of unpaid taxes; the executor’s personal assets are not liable for the $2 of the decedent’s unpaid taxes. However, a foolish or ill-advised executor could find himself personally liable and his personal assets taken by the IRS by a non-IRC provision: §3713 of 31 U.S. Code. See also Cal. Rev & Tax Code §19516.