Defendants Robert and Scott Shriner were appointed as co-administrators of the estate of their mother, Carol Shriner, in 2004.  Unfortunately, Carol Shriner had not filed income tax returns for five of the last seven years of her life, and eventually the IRS determined that she owed a tax liability, along with penalties and interest, of $333,000.  The Shriner brothers hired a law firm to file those back tax returns on behalf of their mother's estate, but for some reason the taxes were not paid along with the returns.  During this time the brothers had signed a power of attorney appointing the law firm to receive all notices and correspondence from the IRS regarding the estate's tax liabilities.  In 2006, the brothers filed a report with the local Maryland probate court showing that they had made distributions of $471,000 to the estate's beneficiaries.  These distributions left the estate insolvent and unable to pay the income tax liabilities of the deceased Carol Shriner.

The IRS used Section 3713 of Title 31 of the federal code to pursue the brothers as fiduciaries of their mother's estate.  That code section provides in general that an estate representative who distributes estate assets without first paying federal government claims of which the representative knew, or should have known, becomes personally liable for unpaid federal claims if the estate becomes insolvent. 

An interesting aspect of the Shiner brother's defense was their denial that they had actual or constructive knowledge of the unpaid taxes, presumably based on lack of communication or miscommunication with the law firm they had hired.  The federal court rejected this defense based on the fact that the brothers had signed the back income tax returns showing that taxes were due, so they obviously had notice of the existence of tax liabilities.  In addition, since it was established at trial that the law firm had received notices from the IRS of the tax liabilities, that knowledge was presumed under the law to have been communicated to the brothers as clients of the law firm.

In the end, it is hard to feel too sorry for the Shriner brothers, because it turned out that they made the $471,000 in distributions from the estate directly to themselves as the sole heirs of their mother Carol.  As a result, they could have been held liable for the unpaid taxes either as beneficiaries or as fiduciaries.  However, in other situations where the executors or administrators of an estate may not be estate beneficiaries, a result such as the ruling in the Shriner case may mean that an executor is writing a check for the estate's taxes out of his or her own pocket without receiving any distributions from the estate.  The responsibility of being named as a fiduciary can be a costly one without proper guidance.