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Probate and the Collection Process
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When a person dies, a legal process called probate usually occurs. A personal representative (executor) of the deceased must file any missing returns and pay tax debts. Debts are paid using assets from the estate. (See Minnesota Statute 289A.08, subdivision 1(b) and 289A.31, subd 1(1).)
If the personal representative transfers assets without paying tax due, we can hold the personal representative, heirs, beneficiaries, and spouse liable for the debt.
If we are collecting for another agency, we return the debt to that agency.
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Probate is a county court process that occurs within three years after the date of death. To collect tax debt, we must file a claim with probate to receive money from the estate. Probate ends when the personal representative or court issues a final account detailing the assets and how they were distributed. A copy is filed with the probate court. The personal representative must provide a copy of the account on request.
If the deceased is an officer of a corporation owing business tax, we may personally assess the deceased officer for the debt. Assessing personal liability involves sending an Order Assessing Personal Liability letter in care of the personal representative. After the appeal period ends, we file a claim with probate to collect money from the estate to pay the tax.
You may not need probate if there are no assets, or you are a joint owner of the assets. The non-probate assets that do not apply to the deceased person's debts are:
- Property with the right of survivorship
- Insurance proceeds, such as life insurance
- Annuities payable to an individual upon death
- Pensions and retirement accounts with immediate withdrawal rights for the named beneficiary
- Accounts with rights of survivorship and payable upon death
A personal representative can request an early audit by filing Form M-22, Request for Early Audit of Minnesota Income Tax Returns. After receiving the completed form, we have 18 months to assess taxes, penalties, or interest. We have 2 years to take legal action to collect the tax.
If we do not receive a request for an early audit, we have 3 1/2 years after the return is filed to audit, and 4 years to take legal action to collect the tax.
Note: A personal representative may have to collect the amount of the audit from the heirs if we assess taxes, penalties, or interest after the date of death.
