Tax Returns for Trusts

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An overview of how trusts work with regard to taxes.

Bookkeeping and tax return preparation are of utmost importance for trusts.

The trustee will need to maintain a proper accounting of how assets were distributed in case there was ever a question as to if the intentions of the trust were carried out.

If you are named as the trustee you need to act quickly to make certain the trust is functioning correctly.

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The responsibilities of the trustee.

Most people create living trusts to assure that their assets are distributed to their loved ones in a manner of their choosing. Trusts can be complex legal documents.

Once the creator dies, all of the provisions contained in the document must be acted on. It is the trustee’s job to make certain all of the provisions of the trust are carried out.

If you have recently been appointed a trustee for decedent’s trust you must take your new job very seriously. The trustee is simply the person in charge of handling the business of the trust. This may include such things as: distributing money or assets to beneficiaries; managing investments; renting or selling real estate owned by the trust; and any other financial dealing.

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Proper bookkeeping and tax returns.

Bookkeeping and tax return preparation are of utmost importance for trusts. The trustee will need to maintain a proper accounting of how assets were distributed in case there was ever a question as to if the intentions of the trust were carried out.

Preparing the annual tax return for the trust is also the responsibility of the trustee. We complete many of these trust tax returns every year. Each one is as unique as the person who created the trust initially. We must thoroughly read the trust document to determine how the trust will be treated from a tax standpoint.

Many trusts continue for many years as a living legacy of the creator. Some trusts distribute their assets quickly and are closed down.

Your trust document helps us understand how best to help you complete your tax return.

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Tax liabilities for beneficiaries.

In most instances the trust’s income is distributed to the beneficiaries. This creates a tax liability for the people who receive this income which must be reported on that person’s personal tax return. Income is defined as interest or capital gains earned by the trust. Sometimes beneficiaries receive money or assets which have no tax liability.

When we prepare your trust return we must be certain of the tax implications of all of the accounting income of the trust and how it is distributed.

We will help you through this difficult process. Please send us an email or call us at (619) 260-1955 to arrange a complimentary initial consultation.

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Duties of the trustee:

If you are named as the trustee you need to act quickly to make certain the trust is functioning correctly.

These duties may be as simple as making sure real estate and personal assets are secured to managing investment accounts.

You will be held to a conservative standard. Your actions should assure that the trust’s assets are managed as a prudent person would handle their affairs.

Remember: the trust’s assets are not your assets. You are simply the caretaker until the beneficiary exhausts the assets of the trust.

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Some of the things you will want to take care of immediately:

Obtain a tax identification number for the trust.
Open a bank account for the trust.
Collect and manage current income and other assets.
Pay creditors.
Notify all heirs, beneficiaries, charities, etc of the trust.
Make required and discretionary distributions.
File and sign the required tax returns.
Pay all income tax of the trust.

Get a free consult.

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Testimonials

Randy was awesome. I set up an appointment online as a new client. Even with the closures due to COVID-19, Randy guided me through an online process and had my taxes processed in a couple of hours.

HeatherSan Diego

I found Randy online. Yahoo to be exact and he’s done my taxes twice so far and i plan to continue to use him. Good guy, professional, quick but thorough. I use to use H&R Block and TurboTax but I found that they didn’t maximize my refund. Randy does.

MannySan Diego

I was referred to Randy by a colleague who said nothing but positive things about her years of experience with him. I have to say I was very impressed. He was organized, knowledgable, professional and provided sound consultation on financial goals I have for the next year.

MichaelVista

Randy was very professional, thoroughly explained my return, and made recommendations as necessary. If we are still in the San Diego area next year, I will be returning to ABC Tax Service.

LisaSan Diego

Randy is genuine and honest and a master in his trade. I am 100% pleased with his services and am confident in his knowledge and would highly recommend him for all your accounting needs!

SaraSan Diego

I am always intimidated when it comes to taxes , especially since I filed late, but I felt at ease and confident in the office here.

DonnaChula Vista

Randy Ames, wearing a nice suit, smiling.

Randy Ames, owner of ABC Tax Service, San Diego

FAQ

Why is bookkeeping important for trusts?

What tax liabilities are there for beneficiaries?

What are some things a new trustee should do ASAP?

Obtain a tax identification number for the trust. Open a bank account for the trust. Collect and manage current income and other assets. Pay creditors. Notify all heirs, beneficiaries, charities, etc of the trust. Make required and discretionary distributions. File and sign the required tax returns. Pay all income tax of the trust.

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