How to Obtain a Liability Release for Estate Form 706
3 of 8 in Series: The Essentials of Filing the Estate Tax Return (Form 706)
Whether you file the decedent’s Form 706 as executor or trustee, you always want to obtain a release from personal liability under code section 2204. This ensures that you will not be liable for any additional taxes assessed against the estate in the future. You should do the same for the decedent’s income and gift tax returns.
The estate or trust may later be found to be liable for additional tax, perhaps due to assets discovered years later, for instance. If you’ve obtained the discharge from personal liability, you aren’t personally liable for this tax.
Send a letter to the IRS in your capacity as executor or trustee and as the person charged with filing the Form 706, requesting that the IRS set the estate tax and release you from personal liability.
After the IRS receives your request, it has nine months to act on it.
As soon as you pay the tax the IRS assesses, you’re released from personal liability for any tax deficiency later discovered. You’re then free to pay other debts and expenses of the decedent — which come after the federal estate tax in priority of payment — and distribute the assets.
Even if an asset appears later, you’re off the hook. If additional tax is later assessed after you’ve distributed the assets, the estate or the beneficiaries will be liable, not you.