Navigating The Complexities

Identifying the filing requirements for trusts and estates can be a frustrating and burdensome task. If you are an executor, trustee, or fiduciary, we're here to help make your job a little easier.

Preparation of Form 1041 for Trusts and Estates

Trusts and estates with annual gross income over $600 must file an annual income tax return using Form 1041. The form reports all the income, deductions, gains, losses, and distributions of an estate or trust.   A Schedule K-1 is produced with Form 1041 for each beneficiary, showing his or her share of the income and deductions. 

Federal Form 706 and Hawaii Form M-6 for Estate Taxes

With the estate tax laws constantly in flux, we actively keep abreast of the newest laws at both the Federal and State level. Currently, a federal estate tax return is only required for estates exceeding $5 million in value. 

Effective May 1, 2010, the State of Hawaii has instituted an estate tax for residents and nonresidents who own real estate and/or tangible personal property located in Hawaii that exceed $3.6 million in value.

If you’re unsure about whether an estate tax return needs to be filed, please contact us for a free initial consultation.

Fiduciary Accounting

Fiduciary accounting determines the receipts and disbursements of a trust or estate.  It is important to distinguish between principal (also called “corpus”) and income since they’re often distributed separately to different beneficiaries.  Expenses must be properly allocated against income and/or principal according to the will or trust documents.  If you are an executor, trustee, or fiduciary, we can help you determine:

  • Assets included in the estate or trust
  • Which assets were sold and for how much
  • Whether reinvested assets increased or decreased in value
  • Debts, taxes, and expenses paid
  • Income received on investments
  • How much should be distributed and to whom

Gift Tax Returns

When is a gift tax return required?

Individuals are currently allowed to give up to $13,000 per year in cash or other items to an unlimited number of people.  If you’re married, you can jointly give $26,000 per year to each recipient.  If you exceed those limits, you should consider filing a federal gift tax return.  Gifting can be an excellent estate planning tool as long as you’re mindful of the tax consequences.

If you make a deal with a relative to sell them assets, such as a house, a car, or an interest in a business, the IRS wants to know about it. If the sale price does not reflect fair market value, the IRS treats the transaction as a taxable gift and requires you to file a gift tax return.

Learn to use the gifting rules to your advantage and avoid gift and estate tax headaches in the future. Call us and we’ll be happy to advise you.