Q: My deceased mother owes taxes from 2023, but her estate is insolvent.
Hello, My mother passed in 2023. I did her taxes in which she does owe a balance (around $3k I believe). There was no estate, no probate process, etc. We found out much later that she had a small 401(k) balance that didn't list a beneficiary-- and they wouldn't let me move forward without estate ppwk (so I applied/approved to be the administrator of small estate). According to the plan rules (of her 401k), since there were surviving children, the balance must be distributed to all three of us equally. Therefore, there is no money in her "estate" (and never was). Just wondering how to proceed from here. Should I apply with the local courts to prove insolvency to show the IRS? Do I need to fill out form 1041 as a formality? Thanks for any and all help!
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A: Hello, I can say that sometimes it is necessary to probate an estate even though it is insolvent, usually when there are creditors. You should hire a probate attorney in the area where your mother lived. The attorney will need to determine whether the asset falls outside of probate or not. I am an attorney licensed in Alabama and cannot provide state-specific legal advice outside of Alabama law.
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