Tax Liability for Deceased Mother-In-Law

From: Paul Slonaker <pes@burl.averstar.com>
Subject: Tax Liability for Deceased Mother-In-Law
Date: Wed, 02 Aug 2000 11:08:14 -0400

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My mother-in-law died earlier this year, leaving my
wife and her two sisters as beneficieries and co-executors.
(My father-in-law had died in 1995.)  She died in Florida,
which was her primary residence (she spent about half of the
year in New York).  My questions have to do with her tax
liability.

For many years, starting well before my father-in-law's
death in 1995, my in-laws did not even file a Federal tax
return, having been advised by an accountant that their
income was low enough.  My MIL continued this practice
after my FIL died.  As far as I know, she did not file
returns for either New York or Florida as well.  But when
I looked through her financial papers and found 1099 forms
for 1999 and 1998, it seemed to me that her income was
indeed high enough that she would have had to file - and would
have owed taxes.  To be precise, for 1999 she had interest
and dividend income of about $10,400; after subtracting the
standard deduction ($4300) and exemption ($2750), she would
have owed about $500 at 15%.  Her situation in 1998 was similar.

My questions:

1. Is my analysis correct?  This seems very straightforward,
but I may be overlooking something.

2. What's the liability of the beneficiaries/executors?  It
seems to me that the estate is liable for any back taxes and
penalties.  If the estate doesn't pay them, are the
beneficiaries/executors individually or jointly liable?

3. How far back are we liable?  It seems to me that we could
be liable for taxes owed by my MIL since my FIL's death, but
(I hope) not before that.  My BIL, who was the executor for my
FIL's estate, claims that the lawyer who handled the estate did
not file a Federal income tax return.  (It's also possible that
their/her tax situation changed sufficiently at his death that
she owed taxes afterward but they would not have owed taxes
before.)

4. Roughly speaking, how likely is it that this would ever
come back to haunt us?  My SIL's are all for ignoring this
in hopes that we'll never be called on it.  I think that that's
irresponsible, but I think that they would only be convinced
of this if they thought there could be major repercussions
later.

Thanks for your attention.

- -- Paul Slonaker

- -

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