Level 4

1041 deductions allowed for expenses not paid by estate?

Forum|Forum|3 years ago
January 13, 2023
3 replies
30 views

Are estate expenses, like legal fees, paid for using assets that were "transfer on death" allowable deductions on the 1041?

Was thinking "no" because although the estate may be required to pay the expenses, it was not actually the estate that paid them, but rather the asset beneficiaries.

ProSeries Professional

This topic has been closed for replies.

Just-Lisa-Now-

Intuit Community Champion

I think the estate would reimburse the beneficiary for the expenses they paid, then the estate could deduct them.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

BobKamman

Level 15

Without further explanation, I would say that the estate should have been told MYOB when TOD assets were involved. What do you mean by "using assets"? Did the estate have to go to the TOD beneficiaries and tell them, "you need to pay some of these debts because there is not enough money left in the estate to cover them?"

D

DENNYCARRAuthor

Level 4

Yes; the gross estate was primarily tod stock. The remainder was stock without tod. Legal fees exceeded probate estate assets and tod beneficiaries helped pay legal fees with the tod assets (ie assets passing outside of the probate estate but included in the gross estate for estate tax purposes since decedent held power over tod assets up to moment of death). So income from tod assets are not included on 1041 but income from non tod assets are. Thanks for your reply.

BobKamman

Level 15

They probably "helped" with those expenses because the law in most states would make them liable to do so. I see this occasionally, where people trying to avoid probate don't leave enough money available to the PR to fix up the house and pay mortgage and other expenses on it until it is sold. My analysis is that the expenses were collected and paid by the executor/personal representative. So they would be a Form 1041 deduction for the estate. They might then flow through to the beneficiaries on a final K-1 -- although those beneficiaries might not be the same as the TOD beneficiaries.

qbteachmt

Level 15

A main reason to do TOD is to bypass an estate and any trusts. This is its own titled directive, in other words.

More details always help.

Don't yell at us; we're volunteers

Sign up

Login with SSO

Let's get you signed in

Login with SSO

Scanning file for viruses.

This file cannot be downloaded