More details to this question:
My father-in-law passed away a few months ago, had cancelled his three life insurance policies, had a ton of unsecured debt & had been paying the IRS for several years. The accountant is telling my husband that he & his brother are responsible to pay the IRS $2800, which is the amount they are settling for. Is that correct?
2 ANSWERS
It may not be correct unless that amount is coming out of some money that would otherwise be paid to the children. The general rule is that children are not responsible for the debts of parents unless the children are also jointly on the obligation or guaranteed it. If they had signed tax returns or otherwise assumed liability the accountant information may be accurate. To determine for sure, consult with an independent CPA.
Answered on Jul 31st, 2013 at 2:51 AM
As a general rule, no one "inherits" the debt of another. However, your father-in-law's debts would continue to be debts of his estate, meaning property that he left to his heirs may be reached by his creditors, including the IRS, before the heirs have a free and clear claim to the property. Whether or not property is subject to claims is dependent on a number of facts, and I would recommend you contact an attorney to fully analyze your situation. Additionally, although most inheritances are income tax free, some types of income received from a decedent (such as unpaid salaries, disbursements from an inherited traditional IRA, etc.) may result in taxable income to those who inherited them.
Answered on Jul 30th, 2013 at 2:28 PM