Can an estate pay a tax without including the beneficiaries?

A person died in 2010 and an Estate Tax Return was filed in 2011. There is no will. The estate headed to probate and in the interim, they researched and found 50 legal descendants, each entitled to 1/50th of the estate. However, before the probate was finalized the only asset, a piece of property, was sold for a sizable gain. It appears it may have been impossible to get each member's SSN, as several had died and others were identified but are not readily located. Questions is: Can the estate pay the tax on Final Form 1041 and not include the beneficiaries? If so, can they just distribute the net proceeds, if and when they are located? 

Estate Planning, Taxes
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March 2017

This is a very complicated question and you really need to seek legal, estate counsel for this one. That said, normally someone who dies intestate (without a will), will follow the heir guidelines set forth by each state. Here in Texas, generally, the assets would first go the spouse and if no spouse, then down the children. If no children, then up to the parents. And if no "immediate" family, then it would move horizontally to siblings. So there is a precise pattern to follow. When you say "50 legal descendants," do you mean "legal children?" This is why you need legal counsel for this one because it is too complicated to get an answer on Investopedia without risking an incorrect answer due to not having all of the facts.

Regarding the tax, there was no estate tax in 2010, but capital gains can be tricky. Whether and when you receive the step up in basis is determined by when the property was sold. Again, you need some legal estate tax advice on this one. I have a CPA background and have many more questions than answers for you.

Sorry I couldn't be more help, but certainly don't want to lead you astray.

Best of luck and hope this helped, Dan Stewart CFA®

October 2016