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Trustee Services

I am an executor or a trustee - can you help me?

Many individuals - lacking the experience and expertise necessary to administer an estate or trust properly - have no idea of what this responsibility involves. Help may not, and probably should not, come from the attorney who prepared the will or trust because of the potential conflict of interest and ethical problem associated with the question of who they represent - the fiduciary, the estate or trust or the surviving spouse. CPA's, because of their extensive business and technical background, are in a unique position to provide professional services to individual fiduciaries. We have the ability to interact on a professional level with lawyers, brokers, financial planners, other accountants, insurance agents, realtors and members of the decedent's family.

I am an executor - how can you help me?

Individual fiduciaries need professional help in several critical areas of estate and trust administration to get the job done. These areas include:

  1. Fiduciary accounting
  2. Preparation and filing of tax returns
  3. Tax elections
  4. The funding of the marital and credit shelter trusts.

Can you expand on these areas??

Yes, we will comment on these areas in the same order as they are listed above.

  1. Fiduciary accounting involves keeping the beneficiaries under a will or trust informed at all times through financial reporting about the management of the estate or trust and the fiduciary has a duty to so inform them. The accounting principles for fiduciaries are unique and require an understanding of those standards. For example, receipts and expenditures are classified as either income or principal. This allocation is significant for estates but has greater importance in trust administration because trusts have two classes of beneficiaries, the current ones and the "Remaindermen". Making the wrong accounting choice can be costly for an individual fiduciary as errors may not be caught during administration. Such errors typically are discovered by the "Remaindermen" beneficiary or court appointed master when the trust terminates, which can be many years after the inception. We can help a fiduciary address those accounting issues and maintain accounting records for an estate or trust.

  2. Preparation and filing of a wide variety of tax returns are the responsibility of the executors and trustees. In general, those returns are as follows:
  3. a. Decedent's final income tax returns
    b. Fiduciary income tax returns
    c. Federal estate tax returns
    d. Generation skipping tax form

  4. A number of tax elections, either required or optional, are the responsibility of the executor or trustee. Fiduciaries can achieve significant tax and other economic benefits for the estates and trusts they manage. Briefly, those elections are as follows:

  5. a. Qualified terminable interest property (QTIP) election. This election is made on the estate tax return to qualify all or part of the QTIP for the marital deduction. The effect of the election is to give the executor an opportunity to equalize the estates of the decedent and the surviving spouse relative to different income tax brackets that may exist. Alternatively, the executor can elect all of the QTIP for the marital deduction if deferring the estate to the surviving spouse's death is more advantageous. This must be approached with care because the election, one made, is binding.

    b. Allocation of the generation-skipping tax (GST) exemption is an option that allows the allocation of the $1,000,000 GST to any property transferred from the decedent. This is an opportunity to shelter future asset growth and take advantage of lower estate tax brackets in each estate.

    c. Administration expenses, medical expenses and casualty losses can be deducted on either the estate tax return or the fiduciary income tax returns. Careful planning and consideration to the relative tax brackets is necessary to make that determination.

    d. Alternative valuation allows the estate to value assets at either the date of death or at an alternative valuation date, six months later. The timing of sales and distributions within that six month period is also important.

    e. Special use valuations may be of value where a family business, farm or other special use situation exists. Before using the special use valuation, an executor must consider its effect on other estate tax issues such as the redemption election, section 6166 deferral election, minimization of taxes in the survivor's estate and other tax planning consideration.

    f. Qualified disclaimers may be used to disclaim an interest in jointly owned property. Its use is primarily for tax planning but may also be a tool to correct a drafting error in a will or trust. To be effective, the disclaimer must be made within nine months of the date of death or when the interest came into being.

    g. An extension of time for payment of federal estate tax may be allowed as follows:

    1. A 12 month extension
    2. A 10 year extension for reasonable cause
    3. An extension for a reversionary or remainder interest.
    4. A 5 year extension and 10 year installment payment for closely held business

    These extensions should be considered in light of interest costs and the advantages, if any exist, of deferring the sale of assets to raise funds for taxes.

  6. Dividing property between the marital and credit shelter trusts (also known as the bypass, family or B trust) is an area of trust administration that few trustees have sufficient knowledge to manage themselves. Typically, the will or trust will provide for either pecuniary or fractional bequest interests. The first is a disposition of a specific fixed-dollar amount and the latter is a fractional share or formula of the remaining assets.

Can you be our executor or trustee??

On occasion we will serve as executor or trustee for a large client or in special situations that allow the firm to be compensated appropriately for the work. Our fees are typically the same as those charged by bank trust departments. Special situations might involve hands-on operating assets that need to be stabilized and/or sold to allow the trust assets to be more liquid and more easily distributed.