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Who takes on tax debts after death?

When you owe money to the IRS, you should understand that this is not a debt that will end after your death. In fact, the IRS can and will go to excessive lengths in order to collect on the money you owe, even if it goes against stipulations in your will to leave your money elsewhere.

Note that the IRS will prohibit any disbursements of inheritance until after any outstanding federal obligations get satisfied. Thus, it is important to understand who will handle these obligations.

The burdens your executor handles

Pocket Sense discusses tax debts and what happens to them in the event of the debtor’s death. As mentioned, the debt does not end with the debtor’s death. In the event that you die before paying any backpay or owed taxes, the IRS will then send a collection letter to the executor or administrator of your estate. This person holds responsibility for your remaining assets and must distribute them according to your will.

Federal debts above all

However, any federal debts automatically take precedence over other debts. The person in charge of your estate will not be able to distribute your assets or money to your beneficiaries or repay other creditors. They cannot even pay for your medical bills or funeral expenses until they work out the tax situation, i.e. pay the amount owed.

Note that the executor will also have to file the tax return that you otherwise would have filed on the year of your death, so they should prepare to handle many legal matters specifically regarding the IRS as part and parcel of their job.