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Trust and Estate Accounting and Tax 

If you are a Trustee or Executor of an Estate, we can help. 

Trust Accounting

Trust accounting involves separating the expenses of a trust into different categories. This separation of expenses will help determine the proper treatment for tax and accounting purposes

If there are business expenses carried on by a trust, these expenses must be identified and offset against income when it comes to the calculation of overall business profits. Expenses that are related to a certain type of income need to be recorded separately as well. For example, expenses related to owned or rental property in a trust must be recorded separately. The expenses will be offset against the rent received from the property to calculate the net income.

Expenses for trust management must also be recorded carefully. Some of these include legal, audit, accountancy, and insurance expenses related to management of the trust. The trustee needs to be able to identify the purpose of each incurred expense to ensure these expenses remain separate from business and property expenses. Unlike trust management expenses, the business and property expenses are incurred from earning an income.

Based on the information in the Trust document we will prepare the Trust tax return, Form 1041.

Estate Accounting and Tax

Every beneficiary and every fiduciary should understand Compelling Accountings and Defending Accountings. A court can require a fiduciary to provide a detailed report of the assets managed and justification for expenses incurred. This report is called an “Accounting.”

There are two forms of Accountings; Informal Accounting and Formal Accounting.

What is an Informal Accounting?

A fiduciary creates and submits an Informal Accounting only to the interested parties without court oversight. The complexity will depend on what information the interested parties require. Some beneficiaries only want copies of bank statements while others require detailed breakdowns and reports.

What is a Formal Accounting?

A fiduciary submits Formal Accounting to the courts, as well as to all interested parties. The fiduciary files Formal Accountings in specific, detailed formats. To save time, judges want all Accounting in the same format. A Formal Accounting will require a filing fee and at least one court appearance.

Questions that need to be asked and answered:

  1. What are the reasons to compel a “Formal Accounting?”
  2. Should I provide a formal accounting or informal accounting?
  3. Can a Fiduciary voluntarily file a formal accounting report?
  4. What are accounting by Agents and/or Power of Attorney?
  5. Should I compel an Agent to account?
  6. What is accounting by Executors?
  7. What is “Defensive Accounting” for Executors?
  8. What is accounting by Trustees?
  9. What is accounting for a Trustee?

If you are charged with the responsibility and oversight of a trust or estate, providing accounting, investment and tax, we have your solution.

 We welcome the opportunity to provide you a review of the facts and circumstances and advise accordingly, related to your options. 

Contact us for a free consultation