What do you do when you find an unreported $100,000 in cash in your late mother’s safe? As tempting as it may be to let it slide and pocket the cash, as executor, you now have a fiduciary duty not to mention, multiple beneficiaries. Just how long do you think everyone will be able to keep this secret; avoid banking the funds, bragging to friends or living above their means? Will every beneficiary be willing to have this toxic secret hanging over their head? Maybe, but guess what – it’s not their crime, it’s yours. It’s the duty of an executor to collect, value and report all of the assets of the estate. Therefore the failure to include cash, if discovered, will subject you, as executor, and only you, to penalties for nonpayment, as well as civil and criminal penalties when this failure to file is deemed fraudulent.
Unlike cases where an executor performed their duty and filed the necessary tax returns, there's no statute of limitations in cases where assets were are not reported; after all, the assets haven't been disclosed, and the tax authorities haven't been given an opportunity to review and evaluate reported information.
Even if the failure to file is an honest mistake, if the estate is audited, it’s the executor that will be personally liable for the unpaid tax, interest and penalties because it was he that distributed the estate's assets.
Talk with a knowledgeable and reputable estate planning attorney about this situation.
Reference: New Jersey 101.5 (April 5, 2016) "Why it's important for executors to report all estate assets"