My client's spouse passed 10/2018. His children then went on to sue his wife (their step mother), which led to a year long battle over his assets which is finally beginning to wrap up. I am currently working with his wife / widow to file final personal tax returns and an estate return.
Estate was not opened until 10/2019 and an EIN number was filed for by a bank, which shows a 1041 due date of 8/15/2020. In the estate is $1M and 3 cars, each of which is being distributed to the wife and 2 children. The only income in the estate is $12K in interest income on the bank account, received for 2019, however earned prior to the estate being opened. There will be no interest income expected to be received in 2020 (new bank account is non-interest earning). Expense wise, there are monthly storage unit fees (a result of the lawsuits), lawyer fees (not yet paid), accountant fees (not yet paid) and an outstanding visa bill paid in April 2020 using the estate funds.
I was hoping to get some guidance on best practice for this scenario:
- I am considering filing a fiscal year return to try and have the 1041 as an initial and final return to incorporate both the 2019 income and the 2020 expenses into 1 return. However, the since there was such a gap between date of death and opening of the estate, and since there have been no 1041s filed so far, I'm not sure if this is the best option.
- Her attorney pushing her to distribute the money out of the estate. He had originally told her that she should "as her accountant to overpay the taxes by $20K-$30K" but now is just telling her to distribute the assets in the estate account, leaving $10K for future potential expenses until the estate is fully closed.
The sons are still threatening more lawsuits and I am working to get this return done as quickly as possible to not put my client in the position of delaying further. Any guidance on best way to proceed for this client would be greatly appreciated.
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Megan Muccio CPA
Megan D. Muccio, CPA
Melville NY
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