When Tax Day comes before probate begins

4 min read

Who pays the tax bill if April 15 comes before probate starts?

  • Normally any tax debt would be paid by the estate, filed as your loved one would have filed when they were alive.

  • If Tax Day comes before probate begins, though, the executor does not yet have access to the estate funds.

  • In this case, you will need to file an extension with IRS to get more time to prepare their final tax return.

  • If you cannot file taxes and do not request an extension, the IRS can take action by filing a lien against the estate.

When a loved one passes away, no matter how prepared they were, there will always be loose ends to tie up. One of the common issues that need attention is taxes.

If your loved one owes taxes at the time of their passing, the estate can be pursued by the IRS, which can cause a headache that you certainly don’t need right now.

However, what happens when Tax Day comes before the probate process begins? In other words, who is responsible for paying the owed taxes when Tax Day comes before anyone is assigned administrator or executor of the estate and thus has access to the estate’s funds?

Are beneficiaries responsible for leftover debt?

No, family members do not have to pay a loved one’s tax bill out of their own pocket. They are not responsible for the taxes owed, and they cannot be treated as such by creditors.

All of your loved one’s remaining debts—including the taxes they owe—are paid using the funds from their estate. The executor of the estate is responsible for the final individual income tax return, which is prepared and filed in the same way as when they were still alive.

However, if Tax Day arrives before probate has begun, the executor or personal representative does not yet have access to estate funds. In this case, an extension must be filed with the IRS.

Who requests the extension?

The short answer is: it depends on your situation. Is there a personal representative designated in the will? If not, is there a surviving spouse? If neither, then you will have to elect a family representative.

Keep in mind that this person should be the same person who will be responsible for distributing your loved one’s assets during probate.

Legally speaking, the executor (or administrator) is defined as a person who is in constructive possession of someone’s assets after they die. So in this case, they don’t need to be court-appointed to alert the IRS of your loved one’s passing and file for an extension on their taxes.

If you find yourself in this confusing situation, it might be necessary to consult a financial adviser, tax attorney, or another competent professional to go over your options in this immediate period before probate officially begins.

How to file an extension

An extension for your loved one can be filed in the same way as any taxpayer would file one by filing a Form 4868, but the executor or personal representative should also file a Form 56 along with it. Form 56 is used to notify the IRS that a personal representative is filing on behalf of the decedent.

If your loved one had already filed an extension before their passing, or if the executor needs to file multiple extensions to buy more time until they have access to the estate’s funds, that’s OK.

Just be aware that the IRS may charge penalty fines, which the estate’s funds should also take care of. Again, no funds should come out of a family member’s pocket.

What happens if you don’t file

If you don’t file taxes for a deceased person, the IRS can take legal action by placing a federal lien against the estate.

This means that the executor must pay the federal taxes before dealing with any other debts or accounts.

If the estate doesn’t have enough assets to cover the cost of the owed taxes, the executor must petition the court to declare insolvency, in which case the IRS might be forced to simply forgive the debt.

If the estate doesn’t have enough assets to cover the cost of the owed taxes, the executor must petition the court to declare insolvency.

In most cases, the estate will be able to cover the taxes, but you will want to avoid the IRS chasing them down. Filing the extension is the safest way to buy yourself the time you need without getting into trouble with the IRS. Again, it’s a good idea to consult a financial advisor or a tax attorney to get guidance for your particular situation.

Most people find taxes to be tedious and confusing, and it can be especially complex when Tax Day arrives and no executor has been officially appointed yet. Moreover, remembering to cover your bases with taxes is probably the last thing on your mind while you’re grieving your loved one.

If you find yourself in this situation, it’s always advisable to seek the help of a financial and/or legal advisor. Taxation after death is a complex area, but rest assured that there are experienced professionals in this area who know how to handle the circumstances.

You may be eligible for free bereavement support. Empathy can help with everything from funeral planning to estate administration, with step-by-step guidance and real-time expert support. Many people get free premium access to Empathy as a benefit with their life insurance claim. We partner with New York Life, Guardian Life Insurance Company, Bestow, Lemonade, and other leading carriers. When you make your life insurance claim, talk to your representative about whether Empathy is a benefit they offer.