Employment Taxes

In many cases, people pay for domestic and other help, and do not withhold any employment taxes. Then they die. Some say that the executor should ignore the problem. But the problem with that approach is that the executor, or the successor trustee of the living trust, has an obligation to pay taxes including the obligation to pay the tax liabilities of the person who died. Executors and trustees who don’t pay have fiduciary liability. And they could end up having to satisfy the fiduciary obligations out of their own personal assets if they have distributed the trust or estate. On top of that, the beneficiaries will have “transferee liability” meaning they will have to pay any unpaid taxes out of what they get. If executors and successor trustees take care of the taxes out of the estate and trust, at least neither they nor the estate or trust beneficiaries have to pay them out of their own personal assets.