Probate & Trust Law Section Conference Manual ... - Minnesota CLE

personal liability. If no such notification is received, the Fiduciary is
automatically discharged from personal liability. This procedure does not
relieve the estate from liability for the payment of additional estate tax,
nor does it serve to release the estate tax lien from estate assets or shorten
the time to assess the tax. Instead, releases the Fiduciary from being held
personally responsible. Without this request, the IRS would have
additional time past the three year assessment period to tie the Fiduciary to
the personal liability.
In some cases, estate taxes are paid in installments (e.g. taxes attributable
to a closely-held business). Until the final installment is made, the
Fiduciary’s personal liability remains; however, the Fiduciary can make a
request to furnish a bond to secure the total amount of estate tax to be paid
or he/she can elect that a lien be imposed with respect to certain property,
which is described as “§6166 lien property.”
3. Spousal relief from joint and several liability
a. On behalf of a deceased spouse, the Fiduciary may make the initial request for
relief as long as the decedent met the requirements for making the request while
he or she was alive. If the decedent made the request during his or her lifetime,
the Fiduciary may follow through with the request on behalf of the estate. The
decedent’s marital status is determined on the earlier of the date relief was
requested or the date of death.
b. Specifically, the Fiduciary may seek relief in three possible forms:
i. Innocent Spouse Relief. A joint filer, whether currently married or not,
may elect to limit their liability for unpaid taxes attributable to an
understatement arising from erroneous items on a joint return. This
requires lack of knowledge or lack of reason to know of an understatement
attributable to erroneous items.
ii. Separation of Liability Relief. A Fiduciary, on behalf of a deceased
taxpayer, may elect to limit the estate’s liability to the portion of the
deficiency that is attributable to items specifically allocable to the
taxpayer. Items are generally allocated between spouses in the same
manner as they would have been allocated had the spouses filed separate
returns.
iii. Equitable Relief. If the previous two forms of relief are either denied or
inapplicable, the Fiduciary may still request relief based on the facts and
circumstances showing it would be inequitable to hold the estate liable for
all or part of any unpaid tax or deficiency arising from a joint return.
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