Before You Start Filling in a Form 1041,
You Better Know How to Read a Trust Document
And the Special Trust Accounting Rules!
Great numbers of seniors are transferring substantial wealth to the next generation. And the numbers will grow astronomically once the baby boomers start to do the same.
Typically these wealth transfers occur through trusts, either lifetime or testamentary. And there are many types of these trusts - - everything from revocable living trusts to garden variety irrevocable trusts to more complex IDGTs, QPRTs, GRATs and CRTs.
You, the CPA or tax preparer, can have a big role in preparing trust accountings and filing tax returns (Form 1041), but this work isn’t as straight forward as personal or business accounting and tax prep. There are lots more “grey areas”. Plus, it’s more complex because the rules are dependent upon both federal and state law, as well as the terms of the trust document. You need to know:
- How to read and understand a trust document
- How trusts work (basic trust principles)
- The key legal terminology (what the words-of-art actually mean in plain English)
- Important trust clauses you must pay attention to
- The differences between the various types of trusts
- How these trusts are categorized for tax and accounting purposes as “simple” vs. “complex” or “grantor” vs. “non-grantor”
- Basic trust tax accounting concepts
- How trust income is taxed to either the trust and/or the beneficiaries
- “Fiduciary accounting income” vs. “Tax accounting income”
- How the applicable State Principal and Income Act comes into play
- How to shift capital gains to the beneficiaries (rather than pay the higher trust tax rate)
- And other tax planning opportunities
If you (or a junior associate) are just beginning to handle trust tax accounting and prepare 1041s, or would like to begin, join us and nationally renowned income, gift and estate tax expert, Robert S. Keebler, CPA/PFS, MST, AEP (Distinguished) for a basic level, 90 minute presentation entitled “If You’re Going to Prepare 1041’s, You Need to Know How to Read Trust Documents and the Special Trust Tax Accounting Rules”.