• Travel Expenses

Family Travel Expenses

A common question that I’m asked involves which expenses the estate can and should pay when a loved one dies. The question sounds something like this: “Craig, my father just died and I’m his personal representative. I’m flying in my wife and children, my sister and her family are all coming too. Can I pay for all of the travel, hotel, food and other expenses from Dad’s checking account? That’s what he would have wanted.

Sounds reasonable, but unfortunately one has to be careful when paying for family travel expenses to attend a loved one’s funeral. First, let’s discuss what expenses are properly paid from the estate. Any reasonable travel expenses incurred by the representative/trustee are proper tax deductions from the estate, and so long as the will and/or trust does not conflict – can be paid from estate funds.

Cleaning up the deceased’s home, costs associated with taking care of the remains, paying clergy for the service and other such expenses are also all valid items that can be paid from the estate. Same with costs associated with a reasonable reception for those attending the funeral or related services. This is true even in situations where there is a service in two different the locations, which may be common for those who maintain two residences.

Paying for other family members’ travel expenses, however, is generally not a valid charge against the estate and is therefore not a valid tax deduction items either. Many times, this result strikes the family as unfair. In these situations, I suggest that the beneficiaries can agree to use part of their beneficial interest pay for these types of expenses, although it should be agreed upon in writing before-hand. The agreement should lay out specifically whose beneficial interest will pay for which travel expenses. Everyone should understand that the payment of these expenses for anyone other than a personal representative or trustee is not tax deductible. Each beneficiary would be paying for these items with “after tax” dollars.

Can a will or trust be drafted to include a provision to pay for travel expenses of family members? It can. If you want such a provision I would suggest a cap on the expenses be put in place. Even if such a provision exists, the dollars would still be “after tax” expenses. In other words, the provision does not make these amounts tax deductible.

Allow me to elaborate on the payment of expenses for a reception or a wake. The IRS generally does not challenge “reasonable” expenses for these items. What’s reasonable is subject to interpretation. One would rightfully expect Walter Cronkite’s funeral reception to be more expensive than, let’s say, mine. Therefore his family would likely be able to deduct a greater amount for a reception (so long as they could document the amounts spent) than my family would be able to. But one should always exercise conservative discretion to make sure that you don’t raise IRS scrutiny.

If you are faced with these issues it’s always advisable to consult with the family estate attorney or CPA.

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