Q: Is there a need to delay probate estate distribution until 2019 if decedent had no income source as of Oct 2017 (DOD)
Executor and myself are the beneficiaries, probate assets are all liquidated and in the estate acct. The court can be petitioned close probate as of May 1, 2018. Payments/fees left to come out of the estate are capital gains on the house sale, court referee fee, legal and executor fees. Executor says that estate distribution will have to be delayed until next year because of "write offs" such as probate fees and legal fees which would cause her to file taxes for the decedent in 2019. Yet all income sources stopped as of Oct 2017 and final taxes were filed Apr 2018. Are there any unforseen reasons as to why taxes would need to be filed for the decedent in 2019?
A: I would say the PR is wrong or maybe there has been a misunderstanding somewhere. Usually the final 1040 is done April 15th the year after death. Then there is a 1041 fiduciary return which usually runs on a fiscal year starting from the date of death forward for a year but that can be cut short after 3 months or 5 months or whenever. In your fact pattern there might be two 1041 returns to file but the last 1041 is usually filed after the main distribution is made. Thus I see no reason to delay the distribution for tax reasons. I hope this helps. Good luck. -John
A: There does not seem to be any need to delay closing the estate for that long. The executor will have to file a final fiduciary income tax return, and may have income taxes to pay, and will likely incur expenses to do so. If the final return has already been filed, though, then there is no need to hold back funds for future taxes. What many would do is to estimate the size of the reserve needed to cover all of those administrative expenses, and then file the final report and petition for final distribution, asking the court to approve holding back an adequate reserve to cover those expenses. Either that, or the executor could file a petition to allow for a preliminary distribution to enable some portion of the estate to be distributed to the beneficiaries. You should consider consulting with an experienced probate litigation attorney near you for guidance.
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