Trust & Estate Services

Trust & Estate Services

Fiduciary Tax Services

Trusts and Estates typically must also file income tax returns based upon the income of the entity. The filing threshold for trusts and estates are much lower than those for individuals. And the tax brackets for fiduciary returns are compressed so careful work is ever more important. Additionally, the Fiduciary has great responsibilities to the beneficiaries and remaindermen, so conservative scrutiny in important. There are some special circumstances which affect Trusts and Estates particularly.

  • Appraisals of Assets
  • Collection of final wages for the decedent
  • Selling non-distributed assets including personal property, investments, and real estate
  • Collection of excess subscriptions due the decedent
  • Payment of debts due the decedent
  • Payment of specialized expenses and probate and court costs

Fiduciary income tax regulations have some similarities to personal and business income, but there are distinct differences as well. These can be differences in the reporting of income and deductions and in the timing and deadlines for certain activities.

  • Estates and some Trusts can use a fiscal year for filing their income taxes
  • Some cash flow into the Estate or Trust may not be taxable (e.g. life insurance death benefits and others).
  • Some taxable and non-taxable income may not come to the Estate or Trust in cash (e.g. reinvested dividends) but must be considered.
  • If a Decedent has both an Estate and a Trust using the Section 645 election can reduce the number of returns to be filed and be an income tax saving mechanism.
  • There are requirements of reporting to the beneficiaries and remaindermen on a timely basis, or the penalties can be crippling.
  • Coordination between the Trustee or Personal Representative and other advisors – attorneys, insurance agents, financial planners.
  • Coordination between Trustees and Personal Representatives in the case of both a Trust and an Estate for the same person or related persons.
business tax

Federal Form 1041 is the primary form used to file these returns. As with personal and business returns, there are numerous additional schedules which are frequently required to compute the minimum tax and communicate this effectively to the agencies. Various states have different Fiduciary tax forms. We have experience with these specialized projects.

Michelle Palmer, Office Manager at TTA Tax.

Trust and Estate planning with Thompson Tax Associates is easy and gives you peace of mind about the future.

Our Skills Include:

  • Managing the Estate if a loved one passes away
  • Working with attorneys to prepare the Estate inheritance and income tax returns
  • Serves as a Estate’s Personal Representative if requested
  • Developing a plan to pass on your legacy
  • Explaining ramifications of the variety of allowable actions in trusts
  • Knowledge of the ever-changing tax laws and regulations

Estate Tax Returns

Many consumers assume that Estate Taxes are no longer a factor. This is incorrect. While the threshold for filing Federal and MD Estate Forms706 and MET-1 have been increased and the returns may not be required, there are still good reasons some file these forms.

  • Portability of the Estate Exemption. For a married couple and one of them passes away, the Personal Representative of the Estate can file Form 706 and MET-1 showing the agencies that they seek to carryover the personal exemption from the first spouse to the remaining spouse. This can be valuable in reducing any Estate tax for the remaining spouse.
  • Recognition of an Asset’s Value. When Form 706 is filed the assets of the decedent on the date of death are valued. These values are supported by statements, investment prices, and appraisals. If an Estate or Trust contains unusual assets which may have increased in value – obtaining an appraisal by a reputable Appraiser will identify the value at that time. When the asset is sold later by the beneficiaries the basis is confirmed.
  • Just in case. Sometimes it happens that the persons assets were not enough to require an Estate Tax Return. However, if assets are discovered later – perhaps another Estate left assets to the decedent that were not recognized at the time. or there are assets at unclaimed property (some long forgotten stock.) If the Estate return had been filed the statute of limitations is running and the Estate will be free from failure to file penalties.

Trust & Estate Planning

We explain how legal documents work and the advantages and disadvantages of Wills and Trusts. We can
give you detailed information about the Probate process and help you make various decisions.

Trust & Estate Planning

We explain how legal documents work and the advantages and disadvantages of Wills and Trusts. We can give you detailed information about the Probate process and help you make various decisions.

Gift Tax Returns

Many taxpayers who have amassed significant resources and are still in good health are seeking to reduce their Estates by gifting assets to the next generations. This can be a good tool to manage your income and get assets to those who may need them now rather than when one passes away. There is an annual limit above which gifts must be reported on Federal Form 709. If a Gift Tax return is required it does not mean there are taxes to pay. The amounts first reduce the lifetime Gift and Estate Tax Exemption then tax is applied. For 2019 that limit is again $15,000. This is a limit of the amount one person can give another person. In general, this does not apply to spouses who have unlimited gifting between themselves. So, if a joint couple wants to give assets to another person each can give that person assets (cash, stock, bonds, real estate, etc.) up to $15,000 before a return is required. Each should write a separate check or the shares come from separate accounts owned by each.

These Gift Tax rules do not apply to gifts to 501(c)(3) organizations which are Charitable Organizations. Larger gifts to charitable organizations should be discussed with your tax preparer so you are making them in the most tax advantaged way.

There are special Elections for those gifts to Section 529 plans. If a grandparent, for example, endows a 529 plan for a grandchild they can claim an Election to treat that gift as over a 5-year time frame reducing the impact on the lifetime Gift and Estate Tax Exemption.

Gift Tax Returns should be considered part of your permanent records as they will be needed by your Personal Representative when managing and closing your Estate.

Start typing and press Enter to search