Being the executor of an estate can be a difficult and time-consuming work, especially if the estate will have to pay estate taxes to the IRS. Because of this it is important that executors be allowed to collect reasonable fees from the estate to encourage people to take the time to serve as executors.
If an executor is not careful he or she can lose out and may not be able to collect any fees.
The Wills, Trusts & Estates Prof Blog discussed a recent example of that in "Section 6166 Lien Causes Executor to Miss Out on Fees."
In this case the executor took a Section 6166 election which allowed estate taxes to be deferred and an estate tax lien to be put on the property.
In such instances, when the property is sold, the proceeds are used to pay the estate tax.
This executor, however, had not yet collected his full fees and the property declined in value to a point below what was owed to the IRS.
The executor argued in court that his fee claim should take priority over the IRS' tax claim. However, the court ultimately disagreed and the executor will not be paid.
Executors should take notice of this case and make sure they work with estate attorneys and arrange to be paid their fees before taking Section 6166 elections.
Reference: Wills, Trusts & Estates Prof Blog (Oct. 18, 2016) "Section 6166 Lien Causes Executor to Miss Out on Fees."