Estate Planning Executor Checklist

Executor/Administrator/Successor Trustee's Responsibilities and Checklist

1. ___ Locate the last will and/or trust document(s)
2. ___ Carry out written instructions of the decedent relating to his/her body, funeral, and burial arrangements
3. ___ Locate all important papers and information of decedent
4. ___ Change mailing address(es) for statements (bank, investment, etc.)
5. ___ If necessary, select an attorney to handle the estate
6. ___ Select a tax professional to prepare the required tax returns (1040, 1041, 706, and state returns)
7. ___ Notify heirs of appointment of attorney
8. ___ Notify IRS and state of your fiduciary relationship as executor, trustee, or administrator
9. ___ Locate all assets (cash, real estate, securities, collectibles, jewelry, life insurance, safe deposit box, etc.)
10. ___ Take possession of estate property
11. ___ Apply for tax identification number for estate/trust income tax returns (TIN)
12. ___ Transfer the decedent's accounts into account(s) for the estate using new TIN
13. ___ Pay expenses for last illness, funeral and burial expenses, and other debts
14. ___ Have real and personal property appraised as of the date of death
15. ___ Have any other assets appraised or valued as of the date of death
16. ___ Notify life insurance companies
17. ___ Notify trustees of retirement accounts
18. ___ Notify Social Security
19. ___ Obtain a list of debts of the decedent (mortgages, credit cards, auto loans, etc.)
20. ___ Arrange for family's immediate living expenses
21. ___ From the estate, raise cash that will be required to pay estate taxes, administration expenses, and other costs of settling the estate, if any 
22. ___ Decide which assets need to be sold, if any
23. ___ Satisfy charitable pledges listed in the decedent's will
24. ___ Locate last 3 years of income tax returns of decedent
25. ___ If a business is involved, locate comparative financial statements for any closely held business
26. ___ Locate all gift tax returns filed by decedent, if any
27. ___ Decide where to deduct the estate's administration expenses (Form 706 or 1040 or 1041)
28. ___ File final individual income tax returns by the due date (Form 1040 and state)
29. ___ File the estate income tax returns by the due date (Form 1041 and state)
30. ___ Consider special valuation on farm and business real estate
31. ___ Consider QTIP election
32. ___ Within 9 months of the date of death, file federal estate tax return and related state forms, if required (Form 706 and state)
33. ___ Safeguard any assets that will be distributed to minors
34. ___ Prepare a statement detailing the distribution of assets
35. ___ Prepare an accounting of both income and expenses of the estate
36. ___ Distribute assets to heirs and beneficiaries

Form 433-A / Form 433-F

Form 433-A

Key items to look for:

• Get the taxpayer started on a 433-A (see Pub 1854 Instructions) immediately in order to identify issues that may impact your recommendations and goals.
• Background:  The IRS issues collection letters usually five weeks apart in this order:
• CP14 letter  Balance Due - initially notifies taxpayer of balance due.
• OK, now this is when IRS sends out the first round of letters to those who have filed and not paid. Don't ignore the letter. Call the number on the letter and if you can't pay in full set up an installment agreement to pay.
• CP501 - Reminder, We Show You Still Owe
• CP503 - Important – Immediate Action Required
• CP504 - Urgent Notice – We Intend to Levy on Certain Assets, Please Respond Now
• LT11 (Letter 1058) within the last 30 days presents a very urgent situation for Collection Due Process (CDP) and filing Form 12153. IRS Letter 1058 - Final Notice of Intent to Levy
• Normally, a CP504 precedes Letter 1058 (LT11) - Final Notice of Intent to Levy.  TP has 30-days to file appeal using Form 12153 (CDP Hearing) after receiving Letter 1058.
• CP90/CP297 - Final Notice of Intent to Levy and Notice of Your Right to a Hearing
• CP91/CP298 - Final Notice Before Levy on Social Security Benefits
• ACS (Automated Collection System) has electronic sources of income and assets of the taxpayer, such as wages, bank accounts, certificates of deposit and accounts receivable, all of which can be seized administratively from the taxpayer. 
• ACS will issue a Notice of Levy against the taxpayer’s assets approximately six weeks after the Letter 1058. 
• If ACS does not have sources of income or other assets to levy upon, it will either research other sources or issue a Balance Due (Bal Due) to a local area office for collection, several weeks subsequent to the final notice.
• This cycle can take several months to complete.  Each notice is usually issued about five weeks apart.  In high dollar cases or for businesses, the IRS may sometimes skip the complete cycle and go to the final notices.
• Per IRC §6331 and IRM Part 5.10, Part 5.11,and Part 17.3 individual taxpayers are allowed up to one year at a lower Installment Agreement (I/A) payment amount in order to make necessary lifestyle changes to conform to the National Standards guidelines.
• In most situations, the IRS cannot levy by surprise and without prior notice. As a prerequisite to levying, the IRM 5.17.3 and IRC §6331(d) require the IRS to send a Final Notice of Intent to Levy (CP90), giving the taxpayer a "heads-up" before a levy is sent. 
• To ascertain if a CP90 has been sent to the taxpayer, look for the following entry on the taxpayer's IMF account transcript:
• CODE: 971
• EXPLANATION OF TRANSACTION: Collection due process Notice of Intent to Levy -- issued
• DATE: MM-DD-YYYY
• The IRS will take a taxpayer's funds, but not usually without first giving the taxpayer an opportunity to avoid levy. Compliance (filing and paying on time) is the "backbone" of tax resolution. Primary reasons for levy are:
1. Missed deadlines
2. Lack of Communication 
• The IRS cannot levy when a taxpayer has filed:
• An offer in compromise
• A request for an installment agreement
• If there is reasonable doubt that the liability is correct, IRS Policy Statement 5-16 requires the IRS to forbear and cease collection activities
• Modern IRS collection policies, codifying Offer in Compromise, granting statutory rights to I/A's and granting appeal rights before enforcement action, all have their roots in Restructuring and Reform Act of 1998 (RRA 98).
• IRS' "Fresh Start" initiative (Commissioner Doug Shulman, 2012) streamlines I/A's to qualify taxpayers who owe up to $50K, increasing the time to full-pay to 6 years (72 months). A Partial Payment I/A may be implemented if economic circumstances dictate
• The six-year rule allows for payment of living expenses that exceed the National Standards, and allows for other expenses, such as minimum payments on student loans or credit cards, as long as the tax liability, including penalty and interest, can be full paid in six years.
• If your tax debt is > $50K know that the IRS will file a "tax lien" against any real or other property you may own "to protect the government's interest."
• Although IRS seizure of taxpayer assets is not a common IRS enforcement tool, the IRM directs IRS Revenue Officers to seize assets of a taxpayer who will not pay.
• In 2014 there were 432 IRS seizures compared to over 2 million levies.
• Interestingly, there is no legal distinction between a levy and a seizure, just different procedures that must be followed by the IRS.
• Because of this distinct practical difference between levies and seizures in the IRS' perspective, there are far fewer seizures.
• An IRS levy may be used to take a taxpayer's right, title, and interest in the following:
• Cash in banks
• Social security
• Wages
• Alternative collection methods require:
• Demonstrating current compliance
• Showing the potential impact of a seizure on a third party
• An ability to enter into an installment agreement or qualify for an OIC
• IRS collection is most concerned with recovering revenue while considering rules and case specifics
• IRS Policy Statement 5-34 states that seizure action should usually be considered the last option in the collection process.
• Before seizing and selling a personal residence, the IRS must first:
• Have the Department of Justice file a lawsuit to foreclose
• Send out a Final Notice of Intent to Levy
• Secure a court order permitting the sale
• It is necessary to both write and call the IRS as a means to communicate in any given case.
• Form 911 
• Line 12a. THE JEOPARDY ASSESSMENT HAS CAUSED A SEVERE FINANCIAL HARDSHIP ON THE TAXPAYER. HE IS IN DANGER OF LOSING HIS JOB IF HE CANNOT AFFORD TRANSPORTATION TO AND FROM WORK. THE TAXPAYER DOES NOT HAVE ENOUGH CASH-FLOW AFTER THE GARNISHMENT TO PAY FOR RENT AND FOOD. 
• Line 12b. THE TAXPAYER REQUESTS IMMEDIATE RELIEF FROM THE GARNISHMENT. REMAINING LIVING EXPENSES ARE TOO GREAT AFTER MAKING THE IRS GARNISHMENT PAYMENT. THE TAXPAYER WOULD LIKE TO IMPLEMENT AN INSTALLMENT AGREEMENT/OFFER-IN-COMPROMISE THAT HE CAN AFFORD TO PAY.

433-A INSTRUCTIONS:

• Sections 1 to 9, contain line items numbered from 1 to 53. Each numbered item must have a response. Use N/A (for not applicable), Zero, or None, as appropriate.
• Read each numbered item carefully. You will be painting a picture of your ability to pay your tax liability.

Section 1. Personal & Household Information

• Name & contact information - Do not to use a PO Box, unless this conforms to your IRS record of account.
• Marital status – use married and separated if separated (living in different households), and still married.
• Social Security number- Use your SSN and date of birth.
• Same for spouse
• Own home, rent, etc. – remember to think of your purpose when answering questions. "Paint a picture" that supports your purpose, and make sure it makes sense. 
• If living together, IRS will consider both incomes and apply the joint living expenses to arrive at a monthly payment. 
• If living apart and not sharing income and expenses, IRS may only allow the expenses for one person. 
• If living apart and still sharing income and expenses, you will have to explain the additional living expenses created by the two households.
• Dependents are people you are obligated to support. Use the income tax guide definitions for blood relatives. If they are not living with you, they won’t be allowed when using the table allowances, except for legally obligated additional expenses you incur.

• The most common situation of a dependent not living with you would be your minor child living with your ex-spouse, who meets the dependency test. 
• No problem, your child support and other court ordered payments will be deductible.
• "Goodwill" child support outside of a court order has to be explained when dealing with the collection division. You could go back to court and raise your court ordered payments. This is an option, as long as it’s a court order for child support and related child welfare, and you can prove that you are making the payments.

Section 2. Self-employed Information

• If you operate a business, put the information here. Then fill out Form 433-B so you can deduct your related expenses against the income. Sole proprietors may use 433-A for their business reporting.

Section 3. Personal Asset Information
1. List your checking & savings accounts and balances. If the balance is high because of outstanding checks, submit bank reconciliations to the IRS showing the true balance. 

• A 3-month "average daily collected balance" shown on the first page of the bank statement is a good average to use. 
• IRS allows $1,000 deduction from total bank balances.
• Cash on hand – Will be added up later as available assets for the IRS. The Internal Revenue Manual - Collections Section, instructs the Revenue Officer to clean out all available assets before considering an Installment Agreement. Your assets, cash or otherwise, get added together and increase the amount you have to pay in settlement.

2. List your investment accounts. Discounted at 80% minus any loan balances. If tied up as collateral, the IRS won’t expect you to cash it in to pay the government.

3. List your retirement accounts. Discounted at 70% minus any loan balances.

4. List cash value life insurance policies.  If you have a cash value (CSV) in your life insurance policy, IRS may ask you to withdraw it.

5. List real estate in your name. Fill in all items, and attach an explanation for any fractional or joint ownership. If not in your name, omit from list.

• Remember, if you have an equity interest in a corporation, partnership, family trust, etc. you must list it on this form. You will be signing the bottom of the last page “under penalties of perjury” so on the day you sign it, the information must be true, correct, and complete to the best of your knowledge. 
• If you have "any %" interest in an asset or business put it on 433-A or 433-B as appropriate, with a value for your interest. Be prepared to defend it. Even if the value is minimal, you need to list it to avoid fraud. Avoid arguments concerning valuation.
• Be cognizant of interests that are traceable. (Information on K-1's from Form 1065 or 1120S to which IRS has access).
• Be extra careful in an Offer. If the Offer Division feels that you are hiding assets, they can turn down your Offer based on non-disclosure.
• Use Quick Sale Value for current value (the IRS does). 

6. List all the vehicles titled in you and your spouse’s names and respective loan balances. Use a "best guess" (Kelley Blue Book) at any balances not readily available. If you lease (or lease to own) put the vehicles here. (Use vehicle FMV times 80% minus Loan Balance equals amount of vehicle equity available for Offer).

• NOTE:  
• If you are filing an individual Offer, the IRS permits you to:
• subtract $3,450 from the value of first vehicle. 
• If you are filing a joint Offer, the IRS permits you to: 
• subtract an additional $3,450 for a second vehicle for a total of $6,900. 
• Enter the amount on Line (6d). Do not enter a negative number.

7. Other valuable items. – (e.g. stamp, coin, gun, jewelry, antique collections) This helps the IRS know about the availability of assets affecting your ability to pay any liability, or make timely payments.

• Available credit – the IRS looks for untapped sources for you to use and pay faster.

Section 4. Business Asset Information (for Self-Employed)
8. List your business checking & savings accounts and balances.

9. List business assets. 

10. IRS allowed deduction for books & tools of the trade.

• Does it matter where you list it? In general, no. However, in an Offer situation, under IRC§6334(a)(2) you are allowed to deduct;

1. $4,540 (TY2015 amount) from your business assets (Tools of Trade) on 433-B.
2. $9,080 (TY2015 amount) from your Furniture and personal household effects on 433-A..

• Notes Receivable - Put down people who owe you money personally if you want the IRS to attempt to collect it.
• Account Receivable goes here.

11. Value of personal assets minus §6334 exclusion.

• Box 1. Available Equity in Assets

Section 5. Business Income and Expense Information (for Self-Employed)
Lines 13 to 30. This can be on a 433-B. If you are paid on a 1099 with no deductions or related expenses (it’s rare not to have expenses), and decide to not use Form 433-B, but actually have business assets, list them here.

• Box 2. Net Business Income

Section 6. Monthly Household Income Information 
31. W-2's, social security and social security here

32. W-2's, social security and social security here (spouse)

33. Interest & Dividends – From interest bearing accounts. If recently liquidated, or will be liquidated shortly, the interest and dividends no longer exists, then leave it blank.

34. Distributions from partnerships & S-Corps

35. If you actually happen to receive rental income, (pull out depreciation, it’s not a cash outlay). Explain details.

36. Carry over from Form 433-B (or Box 2 or 1099 total if 433-B not used).

37. Child support received. Yes it’s considered income for collection purposes. Don’t worry, you get a deduction to offset this.

38. Alimony here.

• Box 3. Total Household Income

Section 6. Monthly Household Expense Information 

• Here we show the IRS that most of your income is absolutely necessary for your living expenses. 
• The first three items (Food, Housing, Vehicle & Out-of-Pocket health care costs) have table amounts. It’s not realistic to get the IRS to go beyond these amounts. Download the National Standards tables.

41. Food, etc. – Table amount is allowed, even if you spend less. If you have a physician’s letter requiring you to eat certain foods that increase your food bill you can add that to your health expense. Make sure you include the letter with your receipts. 

42. Housing and Utilities – Table amount again, but IRS has a 1-year rule, so if your amount is greater than the table amount, you can use your amount for the first year, and then their smaller table amount after that. It’s not automatically given at your request.

43. - 44. Vehicles. Use Table for each vehicle. There are two parts, one for monthly payment (ownership) and one for operating expenses (upkeep). These amounts are capped, so read the instructions carefully.

45. Public transportation (if applicable) Use Table amount.

46. Health insurance premiums. Medical expenses from your paycheck, separate payments, and any other methods you actually paid for physicians, dentists, insurance, travel to physicians, prescriptions, etc. – all medical related expenses. Be prepared to have receipts and explain why the past expenses represent the future.

47. Out-of-Pocket health care costs. See Table. (e.g. co-pays, deductibles, prescriptions) 

48. Child support and other court ordered payments go here and are readily accepted by the IRS.

49. Child day-care is allowed only if both spouses work. Special needs dependent care and expenses are okay even if one spouse doesn’t have income.

50. Life insurance – allowable expense

51. Current taxes. This is your FITW, FICA, and Medicare, from your paycheck, and estimated payments. Use the last three months pay-stubs as a reference.

52. Other secured debt – yes under acceptable circumstances. (e.g. Student Loans)

• Other expenses – If you have certain expenses that are necessary for living, and are not part of any item above, then list them here and be prepared to substantiate.

53. Delinquent State and Local taxes

• Box 4. Household Expenses

• Box 5 = Box 3 minus Box 4 shows Disposable Net Income (DNI), or how much you can pay each month toward your liability. Let’s look at this from another perspective.
• Let’s say you have a liability of approximately $50,000 under your social security number for personal and/or trust fund taxes. Consider the following cases.
1. You have hardly any assets, say $5,000 worth and your 433-A shows that you can’t make monthly payments. You are probably an Offer in Compromise candidate. If you can fill out the Offer Form 656 prior to the deadline given to you by IRS collections, and meet the other requirements, then submit the offer to the IRS in place of doing a payment plan. If you can’t submit Form 656 by the deadline, give Collections the 433-A and 433-B information with backup and request time to do an Offer.
2. You have hardly any assets, say $5,000 worth, and you can pay $300-$400 per month. Given that the $50,000 is accruing interest and penalties, you will not be able to pay this off in 10 years. Ten years is the (stature of collections) time that the IRS has to collect the money starting from the date it is assessed. Not that they will give you that amount of time anyway. They want the liability paid off as soon as the financial statements allow. In the alternative at least 6 years. Anyway, you are probably an Offer candidate. If you fill out the Offer Form 656 prior to the deadline given to you by IRS collections, and meet the other requirements, then submit the Offer to the IRS in place of doing a payment plan. If you can’t submit Form 656 by the deadline, give Collections the 433-A and 433-B information with backup and request time to do an Offer. 
3. You have hardly any assets, say $5,000 worth, and you can pay $1,000 per month. This is close. You’re probably not an offer candidate, but you will have to ask for a longer payout, probably by signing a 2751 extension, giving yourself additional time, past the statute of limitations on collections, to collect the money. You should agree to this so you can get your payment plan or Offer approved later on.
4. You have hardly any assets, say $5,000 worth, and you can pay $1,000-$2,000 per month, then move forward with the payment agreement or Offer. But wait, even though the financial statements say so, you really can’t afford $1,000 per month. Well "too bad, so sad" says the IRS. You do not have a choice. If you don’t agree the IRS will take levy and seizure action until the debt is paid.

• Before submitting the 433-A and 433-B, monthly payment amount, and asset liquidation using QSV (Quick Sale Value @ 80%), and you want to liquidate more assets, like your home for instance, that’s okay. It will lower the interest and penalties that are accruing. If you want to pay a larger monthly payment, then do so at your option. You are not obligated to pay any more than the minimum you can absolutely afford.
• If you make additional payments, or increase your monthly payment voluntarily, the IRS won’t reduce your next monthly payment. 
• For example, you are required to pay $500 per month. One month you get “extra money” and pay an extra $10,000. The next month you can only pay $450 (not the whole $500.) This will break your agreement. 
• If this ever happens, or if you are short on a payment, call the IRS immediately and explain that you are "short" this month and IRS may give you a grace period with permission to pay later.

Section 7. Calculate Minimum Offer Amount

• Mathematical formula (Offer Options)
• Offer option #1: Minimum acceptable Offer amount (full payment within 5 months)
• 12 times monthly DNI + net equity in assets
• Offer option #2:  Minimum acceptable Offer amount (full payment within 24 months)
• 24 times monthly DNI + net equity in assets.

Section 8. Other Information

• Beneficiary to estate, trust of life insurance policy?
• Bankruptcy?
• Lawsuits? 
• Asset transfers for less than full value in past 10 years?
• Living outside USA in past 10 years?

Section 9. Signatures

Form 433-F

• Most IRS collection personnel want you to fill out the 433-A to present your personal income and expenses to them, and a 433-B to present your (non salaried or non W-2) income and related expenses, assets and liabilities to them. Sometimes ACS will demand that you fill out and send in the 433-F. 
• The 433-A gives a larger and more detailed picture of the taxpayer’s situation.
• Lay everything out on the 433-A and if needed the 433-B, figure out your table allowances and get an idea of what your monthly payment should be, and then transfer it to the 433-F. 
• Anything that doesn’t fit on the 433-F, can be put on a separate attached schedule. You are entitled to all IRS allowable expenses whether or not you can fit them on the forms! 
• Then, do your formal request for an Installment Agreement in a separate letter and include it with the form 433-F and the required backup.
• Remember, even if IRS asks for 3 months of receipts, ask yourself if 3 months gives an accurate description of what you can pay each month? Extend it to 4 months, or 5, 6, 7 etc. giving you a more accurate picture (e.g. recurring medical bills and prescriptions paid).
• Document your expenses with the most extensive amount of backup receipts, cancelled checks, doctors letters, etc. Prove to the IRS with supporting documents you actually paid what you are saying?
• The 433-F is similar to the 433-A, refer above for explanations.