Does a Florida Estate Have to Pay Civil Fines Assessed Against the Deceased?

Although civil lawsuits against a deceased defendant may continue against their estate after their death, criminal cases typically die with the accused. After all, you cannot prosecute a dead person. The general rule is that a criminal prosecution must be suspended or “abated” once the court is notified of the defendant’s death. Even in cases where the defendant has been convicted of a crime but has a pending appeal, the abatement rule usually invalidates the entire prosecution as if it had never happened.

IRS Seeks $17.3 Million in Penalties Against Florida Woman’s Estate Over Failure to File Form

But what about any financial penalties assessed against a person for civil violations of the law? Do those fines survive death? Put another way, does the deceased defendant’s estate or trust have to pay these fines?

A federal judge in Fort Myers, Florida, recently confronted these questions. In United States v. Gaynor, a woman (the decedent) inherited a Swiss bank account from her late husband. The husband established the bank account through a Panama-based corporation in 2022. He died in 2003. She died in 2021. Her son was then named personal representative of her estate and successor trustee of her revocable trust.

The Swiss bank account held between $30 million and $35 million in funds at any given time. Under federal law, a U.S. citizen holding foreign bank accounts with an aggregate value exceeding $10,000 in a calendar year must file a Report of Foreign Bank and Financial Accounts (FBAR) form with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The decedent failed to file such reports between 2009 and 2012. Consequently, the Internal Revenue Service assessed approximately $17.3 million in penalties.

In 2021, the federal government sued the son, in his capacity as his later mother’s personal representative and trustee, to collect these penalties. The judge overseeing the case granted the government summary judgment on the issue of whether the decedent failed to file the required FBAR forms. Even the son conceded the point. But a jury trial will determine whether the decedent’s violation was “willful.” If it was not, then the amount of the actual penalties will be significantly lower.

The court also rejected the son’s argument that his mother’s death “abated” the civil penalties entirely. The judge noted that other federal courts that have considered similar cases have all ruled that FBAR penalties did not abate upon death. This was because the penalties for failing to file a FBAR form were considered “remedial” in nature and not “penal.” And remedial actions survive the death of a party, while penal actions do not.

The son argued that in the alternative that the amount of FBAR penalties requested by the government constituted an “excessive fine” barred by the Eighth Amendment to the U.S. Constitution. The court declined to rule on that issue at this time. The judge said this question could be revisited after the jury trial.

Contact Florida Estate Litigation Lawyer Mark R. Manceri Today

Florida trusts and estates often face outstanding creditor claims following a person’s death. A qualified Pompano Beach trust and estate litigation attorney can advise you on this process and represent your interests in court. Contact Mark R. Manceri, P.A., today to schedule an initial consultation with a member of our staff.

Source:

scholar.google.com/scholar_case?case=13245455447282083748