In late March, Congress passed the CARES Act as a way to provide some economic relief to businesses, families, and individuals impacted by the COVID-19 health crisis.
One part of the CARES Act included direct Economic Impact Payments to qualified individuals. As a result, most Americans have or will receive a check from the U.S. Treasury in the amount of $1,200 for each adult, and an additional $500 for each dependent child.
For those taxpayers who have a bank account on file with the IRS, the funds are directly deposited. Others without an account on file, or who do not file federal income taxes, will receive a check in the mail.
One unfortunate outcome of sending money out to every eligible taxpayer is that some of those individuals passed away before receiving the payment.
What then becomes of the Economic Impact Payment sent to a deceased individual?
Legal practitioners have wrestled with this question, and how to advise their clients, since the Treasury first started issuing funds. In the beginning, the most commonly followed advice was to retain the funds until the IRS issues further guidance or rulings. Alternately, the paper checks issued by the IRS are sent with return envelopes stating “IF RECIPIENT DECEASED, check here and drop in mailbox,” and many practitioners have advised their clients to do so.
However, direct deposits are not accompanied with any similar direction. And while it may seem counter-intuitive that a deceased individual (their estate) would be entitled to retain the funds, the specific language in the CARES Act authorizing payment is reasonably open to such an interpretation.
On May 6th, recognizing the pervasive impact of payments issued to deceased individuals, the IRS took its first step towards issuing guidance.
According to the Economic Impact Payment FAQ on the IRS Website, a payment made to someone who died before receipt of the payment should be returned to the IRS by following the instructions on the IRS website about repayments. The instructions include how to return both a paper check and how to return funds that were issued by direct deposit. If the payment was made to joint filers and one spouse had not died before receipt of the payment, only the portion made on account of the decedent must be returned.
While a website FAQ is not a regulation, the IRS has at least provided some direction on what to do with a deceased person’ stimulus check. Each situation is unique, and readers would be wise to consult their own legal counsel to thoroughly discuss the matter before taking action.
If you have questions about how to address your estate planning needs at this time, please feel free to reach out to one of our attorneys to discuss your individual circumstances.
Planning Now! is meant to be informational and does not constitute legal advice.