IMage of living trust & estate planning document

Did you know that KIMBLE offers specialty services in the areas of estates and trusts?

 

These include:

Assistance with Probate Administration

After an individual passes away, the person(s) designated to handle the estate/trust (the Fiduciary), can be required to prepare various filings as directed by the Commissioner of Accounts in the decedent’s jurisdiction. You can think of the Commissioner as the person who oversees the Fiduciary (e.g., Executor, Trustee) while they go through the process of passing assets out of the estate/trust to the beneficiaries.

 

One of the most common filings is an estate and/or trust accounting.  These track receipts and disbursements of assets held inside the estate or trust.  Every Fiduciary is obligated to account to the Commissioner of Accounts for his/her financial actions in the administration of an estate or trust.  An Accounting tracks all receipts and disbursements from the estate or trust.  The purpose is to help the Commissioner ensure the Fiduciary is handling the decedent’s assets according to the terms of the trust document or Will.  There are set formats for reporting this information to the Commissioner and each Accounting is audited by his/her office.

 

Preparation of Fiduciary Income Tax Returns

Each year, most of us are required to file an individual income tax return.  After we die, many of us own assets which will pass to beneficiaries via a Will.  Depending on how the assets are titled at death, they may be placed temporarily in an estate.  Just like an individual, an estate or trust must file an income tax return if assets held in it earn a certain amount of income.  Estates and trusts file Fiduciary income tax returns (Form 1041).  If the returns are not timely filed, the Fiduciary of the estate or trust may incur significant penalties and interest on unpaid tax.

 

Preparation of Gift Tax Returns (Form 709)

In 2021, the annual gift tax exemption is $15,000 per recipient.  This means you can give up to $15,000 to as many people as you want during each calendar year without any of it being subject to a gift tax.  If you give cash or assets worth more than $15,000 to an individual, then you are required to file a Gift tax return.  These are complex tax returns and require a preparer with knowledge and experience to ensure they are correct.

 

Preparation of United States Estate (and Generation-Skipping Transfer) Tax Return (Form 706)

The estate tax is a tax placed on the value of assets you own at your death.  In 2021, you can pass assets valued at $11,700,000 (2021 federal estate tax exemption) estate tax free to beneficiaries.  Assets worth more than that amount are taxed at a federal rate of 18% to 40%.  Some states also have estate taxes.  Given the high exemption, most individuals who die do not have assets greater than this amount and are not required to file this return.

 

However, this high exemption is scheduled to be reduced to $5,000,000 effective 1/1/2026.  In addition, there are proposed law changes in Congress that could reduce this amount even earlier. As a result, many couples who lose a spouse prior to that time are electing to file a Form 706 even though the deceased spouse’s assets were valued less than $11,700,000.  They are filing the form to elect ‘Portability’.  Portability is a provision in federal estate tax law that allows a surviving spouse to use any unused estate and gift tax exemption after the deceased spouse’s death.  This can save a surviving spouse millions of dollars.

 

The specialty services mentioned above are complex and can result in significant penalties and interest if not filed timely and in compliance with presiding laws.  Please talk to your Kimble team if you think you may need assistance with these services.