Agostino & Associates Article on Executor Risks for Decedent's Foreign Accounts (8/21/17)

Frank Agostino and Nicholas Karp, Protecting the Executor Who Becomes Aware of Undisclosed Foreign Accounts, Agostino & Associates Monthly Journal of Tax Controversy (August 2017), here

The introduction:

An executor administering an estate with undisclosed foreign accounts is exposed to substantial risks that may not be apparent. The following discussion is intended for executors and administrators who wish to understand and avoid those risks.

The authors identify the following as "Superficially attractive but risky advice sometimes given by accounting firms:"

The accounting firm advises the executor to:
• Report current year foreign income and file the current year FBAR, reasoning that the executor has signature authority over the foreign account for the current year, but no responsibility for prior years.
• Not file any prior year amended returns or FBARs, reasoning that the executor should not speculate as to the willfulness of the decedent.
• Distribute the proceeds of the foreign accounts to the beneficiaries without taking any position as to whether they are required to file IRS Forms 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. An executor has no obligation to give tax advice to beneficiaries: it is the beneficiaries’ responsibility to determine their obligation to file IRS Forms 3520.
Lastly, the accounting firm advises against hiring a lawyer. The taxpayer is dead: who can the Government prosecute? 

From there, the authors identify the problems and risks.  For example, the authors quickly identify a criminal risk for the executor:

The most dangerous (and perhaps surprising) hazard is the potential for the executor to unwittingly commit a federal crime. 18 U.S.C. § 4 makes it a crime (“misprision”) if a person, “having knowledge of the actual commission of a felony ... conceals and does not as soon as possible make known the same...” Tax evasion is a felony (26 U.S.C. § 7201). Courts have consistently held that misprision requires, “an affirmative act of concealment.” Failing to disclose tax evasion can be considered concealing the theft of money from the United States. Concealing stolen money has been held to be an affirmative act upon which a charge of misprison (sic) may be based. The executor will, under the facts, have all the information needed to conclude that the decedent’s returns understated tax liability and money is due the United States. If it is eventually determined that the decedent’s non-filing was willful, a prosecutor could well reason that the executor’s choice not to amend the returns was tantamount to concealing money stolen from the United States. Moreover, should any returns associated with the estate subsequently be examined, any lapse in providing information about the foreign accounts could implicate the executor in concealment. In either of these situations, if the Government can show the executor had reason to know the decedent’s delinquencies were willful, the Government will have the elements needed to charge the executor with misprision.

And it goes on from there to include civil risks.