Executor Personal Liability for Estate Taxes: Lessons From the Estate of Spenlinhauer Case
When Estate Administration Goes Wrong
In Estate of Spenlinhauer v. Commissioner, T.C. Memo. 2025-134, the United States Tax Court upheld a multimillion dollar estate tax deficiency and penalties against both an estate and its executor personally. The case illustrates how delayed filings, unsupported valuations, and improper asset transfers can expose executors and beneficiaries to severe financial consequences long after a death occurs.
The decedent died in 2005, yet no federal estate tax return was filed until 2017, nearly eleven years after the extended due date. During that time, the executor distributed substantially all estate assets to himself as the residuary beneficiary, leaving the estate insolvent when the Internal Revenue Service later asserted estate tax liabilities.
Key Errors That Triggered the Estate Tax Deficiency
- Failure to timely file Form 706. The estate missed the extended filing deadline by more than a decade, resulting in a large failure to file penalty under IRC Section 6651(a)(1).
- Invalid elections. Because the return was filed late, the estate lost the ability to elect the alternate valuation date under IRC Section 2032 and the qualified conservation easement exclusion under IRC Section 2031(c).
- Undervaluation of estate assets. The court rejected the executor’s reported values for real estate and closely held business interests, relying instead on expert appraisals that significantly increased the gross estate.
- Improper exclusion of transferred property. Property transferred during life but still used by the decedent was pulled back into the estate under IRC Section 2036.
- Unsupported deductions. Claimed deductions for legal fees, executor commissions, and debts were disallowed due to lack of substantiation or because they benefited the beneficiary rather than the estate.
Personal Liability for the Executor
Perhaps the most consequential aspect of the decision was the court’s ruling that the executor was personally liable as a transferee under IRC Section 6901. After distributing estate assets to himself, the executor left the estate unable to satisfy its tax obligations. Under Massachusetts fraudulent transfer law, the court held that the Internal Revenue Service could collect the unpaid estate tax directly from him, limited only by the value of assets he received.
The court also emphasized that reliance on advisors does not excuse noncompliance when the executor knows the advisor lacks expertise in estate tax matters or is not provided with complete and accurate information.
Why This Case Matters to Executors and Beneficiaries
This decision serves as a stark reminder that estate administration is not a casual or informal process. Executors have fiduciary duties to file required tax returns on time, properly value assets, preserve estate liquidity, and ensure that tax obligations are satisfied before making distributions. Beneficiaries who receive estate assets are not insulated from liability when those duties are ignored.
