Trust and Estate Tax Compliance

Depending on the date of death value of oneís estate, the executor of an estate may be required to file a Federal and State Estate Tax Return. Simply stated, the Federal and State estate tax is a tax that is imposed on the date of death value of estate and/or trust assets that pass to the beneficiaries. These taxes may also be imposed on assets that pass outside of the terms of a Will or Trust, such as assets that are jointly owned, assets contained in an IRA, 401(k) plan or a qualified pension and profit sharing plan.

The Federal Estate Tax Return may be simple or complex, depending on the nature of the assets involved and the overall estate plan. In addition, various tax elections should be considered by the executor in order to minimize any federal or state estate tax liabilities. Our law office has extensive experience in the preparation of both federal and state estate tax returns.

Just like individuals, trusts and estates must file income tax returns. Trusts and estates must pay tax on income derived from dividends, interest and sales of estate and trust assets. In addition, proper income tax planning for estates and trusts must take into consideration tax issues pertaining to the beneficiaries of the estate. The following are issues which should be addressed:

  • The proper selection of a calendar year versus a fiscal year for an estate or trust, so as to allow for maximum income tax deferral.

  • Proper timing for matching income and expenses so as to minimize tax liabilities.

  • Proper distribution planning to beneficiaries so as to maximize tax deferral but minimize the beneficiariesí income tax liabilities.

  • Proper planning to terminate a trust and/or estate so as to minimize tax liabilities and maximize available income tax deductions.

  • Proper planning to ensure that distributions to trusts and estates from retirement plans are timely made and are in correct amounts.

  • Proper review and analysis of trust provisions to determine whether the creator of the trust, the trust itself, or the beneficiaries should be taxed on the estateís or trustís income (commonly known as the grantor trust rules).

The Law Offices of David Charous, Ltd. has extensive experience in the preparation and review of hundreds of federal and state income tax returns for estates and trusts. Please let us know if we can assist you with this portion of the estate and trust administration.

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