Trust & Estate Taxes & Accounting

(707) 588-9700

Why we are your best choice for trust and estate tax matters

We believe that trust and estate taxation is a complex area that needs to be handled by highly competent and experienced staff to ensure that clients do not pay unnecessary taxes and/or fall into various tax and financial traps that await them because of the onerous tax laws and rules that most people have no idea about.

Our staff has decades of experience in preparing Trust and Estate Tax Returns as well as assisting our clients and legal counsel.  If you have a Trust or Estate matter to deal with, you need someone who has done a multitude of these returns to make sure you can minimize your taxes.   Returns and reports we typically prepare are:

  • Trust Tax Return – Form 1041
  • Estate Tax Return – Form 1041
  • Estate Tax Return – Form 706
  • Gift Tax Return – Form 709
  • Fiduciary Accounting

Trust Tax Return / Estate Tax Return

Form 1041 is filed for trusts and estate income taxes.  A trustee, administrator or personal representative is typically responsible for filing the returns.

Some things to note regarding Trust / Estate tax returns:

  • Once a trust or estate’s taxable income exceeds $12,500, the trust’s income is taxed at the top ordinary income tax bracket, which is currently 37% for Federal taxes.  Also, states ordinarily tax trust / estate income as well.  Trust tax rates can quickly approach 50%; thus, care must be taken to ensure income is passed out to beneficiaries who are in a lower tax bracket where possible.
  • Long-term capital gains and losses are ordinarily allocated to principal and the trust or estate must pay the capital gains income tax for Federal and States purposes at the entity level at tax rates, which can be in some cases be dramatically higher than individual income tax rates.  However, in the final year of the estate or trust, long-term capital gains and losses are usually passed out to beneficiaries.  We can assist you with tax planning where large capital gains may be taxable at the entity level - as this can make a significant difference regarding how much money beneficiaries are able to keep. 
  • When someone passes away, we work with the fiduciary of the trust or estate to minimize taxes and prepare forms to shorten the Statute of Limitations for the Internal Revenue Service and State(s) and limit liability to the Fiduciary
  • The fiduciary can be held personally responsible by the IRS and State(s) for taxes owed
  • We are here to help walk you through the complex maze of estate and trust tax including explaining how taxes are calculated and discussing what may be done to minimize taxes
  • We will confer with you and your attorney regarding how to title to assets and to determine who owes taxes on the related income.
  • We can advise on determining and adequately documenting the cost basis of assets, such as real property, investment and securities, and other assets.
  • Identify return filing deadlines and extensions, income distribution deadlines, and fiscal year reporting (where applicable)
  • Prepare tax elections, where appropriate
  • Analyze trust documents for tax returns preparation and tax planning

Estate Tax Return / Form 706

My staff and I have prepared many estate tax returns over the years.  This is a specialized area and we get referrals not only from professional fiduciaries and attorneys, but also from other CPA firms.  Estate taxes are exceptionally complex and you need someone like our firm in your corner who has done a lot of this type of work if you must deal with the IRS.

Some things to note about Estate Tax Returns:

  • The estate tax exemption for 2018 was $11.18 million; the 2019 exemption is $11.4 million.  Taxable estates valued at more than that amount are subject to a 40 percent tax on the excess
  • Where a spouse passes away, the surviving spouse may want to file an estate tax return when the estate is less than $11.18 million – as there is something called the Deceased Spouses Unused Exemption, that can be claimed on the Surviving Spouse’s Estate Tax Return
  • We have done IRS audit representation on several estates over the years and are familiar with IRS Estate Tax Audits and dealing with their staff

Fiduciary Accounting (aka Trust Accounting)

Most trust agreements require that a Fiduciary accounting be prepared.  Preparing the required accounting will result in the Statute of Limitations stopping legal challenges after the time has passed under state law – after the accounting has been presented to beneficiaries.  Conversely, not preparing accountings required under a trust agreement can leave the fiduciary (trustee, personal representative, administrator) open to legal challenges well into the future (check with your attorney for more details on this).

Some things to note about Fiduciary Accountings:

  • Fiduciary accounting are not prepared using Generally Accepted Accounting Principles (GAAP); accountings are prepared following state probate laws.
  • Many accountants are not familiar with Fiduciary Accountings.  Don’t presume your accountant knows how to prepare these correctly.  If the Fiduciary Accounting is  not prepared in the proper format, the Court may rule that the Fiduciary did not properly account to the beneficiaries - and the Statute of Limitations may not run.
  • Our firm has prepared Fiduciary Accountings for years and has had our accountings reviewed by numerous law firms and also presented in Court matters.  Also, we have a high-end software program that the Software Company updates frequently that is written solely for preparing Fiduciary / Trust Accountings.
  • We understand the rules on “principal” and “income” for trusts and estates and our staff attends advanced trust and estate continuing education classes to keep up on the latest matters.
  • We require copies of the trust document, all amendments, revisions and restatements, and we review these documents as part of our tax preparation and advisory services.  We also ordinarily confer with your attorney(s) to make sure we are all in agreement as to what the documentation says.

Decedent’s final personal income tax returns

  • It is usually advisable for us to prepare the decedent’s final tax returns when a corresponding trust or estate tax return must be prepared
  • Allocations of income and deductions usually must be made between the deceased taxpayers and trust / estate tax returns

Gift Tax Returns / Form 709

Gift tax returns are required for gifts greater than the annual exclusion of $15,000.  Failing to file required gift tax returns can cause problems in the future – especially if an Estate Tax Return will need to be prepared. The Liftetime Gift Exclusion for 2018 was $11.18 milllon and it is $11.4 million for 2019.  The IRS ruled in late 2018 that it will not "clawback" gifts for estate tax purposes when the Tax Cuts and Jobs Act expires in 2025. 

Trust Tax Consulting / Estate Tax Consulting

Minimizing your total tax burden between estates and trusts is a complicated matter.  We’ll work with you and your professional advisors to help reduce the tax “bite”.  We take your tax situation personally and will do our best to help you pay the lowest legal taxes – without running afoul of tax laws.

Sub Trust Funding

Oftentimes people overlook funding sub trusts, which are spelled out in the trust agreements.  We can work with you to ensure the sub trusts are properly funded and accounted for.

Recommendation

Jacquelynne O., Professional Fiduciary / Santa Rosa, CA
Our firm has used Dave Fisher's office for our toughest cases, year in and year out. Dave consistently provides an excellent work product and has been there for us during attorney mediations when we had to know the answers immediately. Everyone in Dave's firm is incredibly professional and trustworthy and the firm has a great reputation among local attorneys. I highly recommend them for complicated tax issues.

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