Wills, Trusts & Estates
Law Office of Steven M Berger, LLC


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Importance of a CPA in Estate Administration

Tax preparation is a key factor in administration of an estate. In fact, in most estates more money is at stake in taxes than in probate costs or legal fees. First, the accountant must prepare the decedent’s last 1040 without the benefit of the taxpayer’s input. A long relationship between the client and CPA pays dividends in completing this return properly. The estate must also file its own tax return for income earned before the property is distributed to the heirs. If there is a revocable living trust, the trust must file a tax return for income earned after the date the decedent passed away. tax_day_01Here are some of the many questions must answer to minimize expenses of the estate and beneficiaries:

  • Should the estate and trusts elect to file a combined tax return by filing a form 8855?
  • Should the estate follow a calendar year or elect a fiscal year?
  • Should the expenses of estate administration be deducted on the estate income tax form 1041 or the estate tax return form 706?
  • Should income be distributed by the trustee after the close of the tax year under the 65 day rule?
  • Should the trustee issue K-1s to pass the tax liability from the trust to the beneficiary?

Making the correct decision on these five items as well as many other decisions justifies the fee of an accountant well versed in fiduciary accounting. Your estate planning attorney should be understand all these decisions and collaborate with the CPA on all these decisions.