Virginia Estate Planning Attorney Comments on Case of Unsophisticated Executor, Unreliable Attorney
Fairfax, VA (Law Firm Newswire) November 21, 2016 – In September 2016, the Sixth Circuit repeated the precedent that failure to file a tax return and to pay a tax liability must be subject to penalty under §6651(a) (1) and §6651(a) (2).
Estate executors should understand the notion that penalties will be owed in cases where they neglect to file a tax return in a timely fashion or perform a miscalculation of the estate tax liability. However, despite the executor’s consultations with the attorney on several occasions, and the attorney’s reassurances that such duties will be carried out in a timely manner, the attorney neglects to perform them.
Although several executors would deem this to be the responsibility of the attorney, the Sixth Circuit in Specht v. United States ruled that it is the executor’s duty because the executor is required to handle and oversee the conduct of those who are employed to administer an estate.
Prominent Vienna, Virginia estate planning attorney Lisa McDevitt says, “While testators should choose an executor whom they can trust, it is also prudent to select someone who will follow up with the attorney to make certain that the attorney is properly fulfilling the requisite duties involved in administering the estate.”
In Specht, Virginia Escher executed her will eight months before her death. Her cousin, Janet Specht, agreed to serve as executor of Escher’s Estate. Upon the death of Escher, Specht hired a seasoned estate planning attorney, who correctly informed Specht that the Estate needs to file an estate tax return and pay an estate tax liability. The attorney, however, started to sound and appear incompetent and stopped fulfilling their responsibilities.
The attorney proposed that the law firm pay a $6,000 estate tax liability and be reimbursed by the estate at a subsequent date. Then, the executor received several notices from the probate court that the Estate failed to adhere to probate deadlines as well as notices that the Estate neglected to file a first accounting. Moreover, the state tax department notified the executor of a delinquency in the estate’s state tax return. Lastly, a friend informed the executor that the attorney recently showed signs of incompetence while administering another estate. Specht failed to notice and acknowledge these and other warning signs about her attorney's inability to perform their duty.
Although the attorney’s incompetence was outside Specht’s control, she placed all of her trust in the attorney even in the midst of several warning signs. The Sixth Circuit ruled that the executor’s reliance upon the attorney did not release her from her responsibilities to file a tax return and make tax payments. In addition, Specht had a duty to oversee the attorney and observe the conduct of anyone to whom the executor delegated estate administration duties.
This case illustrates the importance of designating an executor who understands the duties involved in this role, and who can be trusted to handle the testator’s property so as to avoid any risk of loss upon the testator’s death.
Lisa Lane McDevitt
2155 Bonaventure Drive
Vienna, VA 22181