What happens when you distribute Trust assets and don’t pay the taxes? You guessed it…
The IRS can go after heirs and trust beneficiaries for unpaid estate taxes. It doesn’t matter that they received property years after the decedent’s death, an appeals court decides. The decedent died in 2001, with most of his assets in trust.
The estate filed a return, paying part of the tax up front with the rest in installments. The estate ceased paying in 2007, but transferred property to the trust beneficiaries through 2013, when the estate was depleted. IRS sought to recoup the tax liability from the beneficiaries. Each person is personally liable for unpaid estate tax, with liability limited to the value of property he or she received.
Paulson, 9th Cir.