When a person write his Will, he will appoint a trusted person or licensed trustee corporation as his Executor. The Executor is to carry out the instructions in the Will. The Executor is responsible for the entire estate administration until the final distribution of the assets is made to the beneficiaries.
One of the duties of an Executor is to pay off the deceased person debts and liabilities from the estate. Often an executor will start paying credit-card outstanding and other liabilities before settling the taxes. Before paying any liabilities, an Executor should consult with a lawyer or an estate specialist to understand the priority of payments, in the order priority funeral expenses, estate administration fee, income tax / federal or state taxes, secured creditor and unsecured creditor liabilities.
Section 74 of the Income Tax Act 1967 states the Executor must not distribute the estate to the beneficiaries unless made provisions for full or reasonable tax payment. Failure to comply with it, the Executor will be personally liable to pay for it equal to the amount of tax payable.
