Estate and Trust Administration For Dummies E-Book

Margaret Atkins Munro

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch
• Veröffentlichungsjahr: 2013

Seitenzahl: 780

Beschreibung

Your plain-English guide to administering an estate and/or trust As more and more of the population reach senior ages--including baby boomers, many of whom do not have wills--an increasing number of people are being thrust into the role of executor, administrator, personal representative of an estate, or trustee of a trust after the death of a loved one. This updated edition of Estate & Trust Administration For Dummiesguides you through the confusing process of administering an estate and/or trust. Settling an estate and administering a trust can be complicated, messy, and time-consuming for individuals named as executor or trustee, most of whom have no previous experience with such matters. Estate & Trust Administration For Dummies shows you how to make sound decisions for your unique circumstances. * Guides you through the confusing process of administering an estate and/or trust * Provides expert advice on unfamiliar estate and trust tax law * Gives you a practical checklist to follow for all of your estate and trust administration questions and concerns Whether you're looking for guidance on how to navigate the probate process and estate taxes, settle debts and bequests, fund a trust, comply with tax regulations, or anything in between, this hands-on, friendly guide takes away the mystery and provides detailed answers to all of your estate and trust administration questions.

Leseprobe

Estate & Trust Administration For Dummies®, 2nd Edition

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ISBN 978-1-118-41225-1 (pbk); ISBN 978-1-118-41226-8 (ebk); ISBN 978-1-118-41227-5 (ebk); ISBN 978-1-118-41228-2 (ebk)

Manufactured in the United States of America

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About the Authors

Margaret Atkins Munro, EA, is a tax consultant, advisor, writer, and lecturer with more than 30 years of experience in various areas of finance and taxation. She’s an Enrolled Agent, licensed by the federal government to represent clients in the areas of tax and tax-related issues, and currently operates a widely diverse private practice that specializes in trust and estate accounting and income taxation, among other areas. A classic example of living a life that doesn’t follow the plan set out in college, Peggy received a BA in history from The Johns Hopkins University, in addition to attending University College in Cork, Ireland, and the Pontifical Institute of Mediaeval Studies in Toronto, Canada. She resides with her family in Vermont.

Peggy is the author of 529 & Other College Savings Plans For Dummies and the coauthor of Taxes (2005, 2006, 2007, 2008, and 2009) For Dummies. She writes a biweekly column on anything and everything to do with money for The Montpelier [Vermont] Bridge and has lectured extensively about taxes and tax-related issues. She’s been interviewed on numerous financial and tax-related topics by a variety of national media outlets, including CNN Radio, Fox Business, The Wall Street Journal, Family Circle Magazine,U.S. News and World Report,USA Today,Parents Magazine, and the Associated Press.

Kathryn A. Murphy, Esq., is an attorney with more than 20 years’ experience in the fields of estate planning and administration, including drafting of sophisticated estate plans and prenuptial agreements for high net worth individuals. She has also administered many estates and trusts, both large and small, and prepared more than her fair share of estate and gift tax returns.

She graduated from The University of Michigan with an AB in English Language and Literature, received her Juris Doctor from Harvard Law School, and is a member of the Massachusetts Bar. Kathy, her daughter, Ana, and their poodle, Danny Boy, have recently returned to her home state of Michigan after more than 20 years in New England. Kathy is the coauthor of Taxation of Estates and Trusts (Michigan Continuing Legal Education) and Estate and Trust Administration (Michigan Continuing Legal Education). She has also lectured on these topics for Michigan Continuing Legal Education. She’s been interviewed by the national media on financial and trust topics. Her writing is an outgrowth of two of her loves: literature and the law.

Dedication

To my dear friend Howard, who gave me the idea for this book, even though he didn’t know it at the time, and to the memory of his parents, Harry and Molly. And to Colin and Jacob, who supported me wholeheartedly as I worked on it.

—Margaret Atkins Munro

To my daughter, Ana, who inspires me in many ways. And to my friend, Peggy, for asking me to join her in this adventure.

—Kathryn A. Murphy

Authors’ Acknowledgments

First and foremost, our thanks to Mike Baker, Joyce Pepple, and Diane Steele at Wiley, who really listened to this idea one afternoon at lunch and then ran with it. Without them, this book would still be a figment of our imaginations. And many thanks as well to our technical editor Diane Hubbard Kennedy, our copy editor Nancy Reinhardt, and, most especially, to our project editors, Alissa Schwipps and Jennifer Tebbe, and assistant editor David Lutton, who were patience personified as we had to tell them, repeatedly, that we still really needed to see the results of the “fiscal cliff” negotiations in order to finalize this edition of the book.

We’ve both had many mentors over the years, among them Palmer Worthen and Frederick R. Keydel, who were responsible for steering us into our careers in trust and estate administration and planning. And we must, of course, thank all our friends in the Private Client and Trust Group and the Trust Administration & Investment Services Department at Goulston & Storrs, PC, where the two of us met 23 years ago and began our long friendship.

Last, but certainly not least, our gratitude to Melinda Haskins and Sean Siemen, who assisted us in so many important ways. This book is as much a testament to their efforts as it is to our own.

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Estate & Trust Administration For Dummies®, 2nd Edition

Visit www.dummies.com/cheatsheet/estatetrustadministration to view this book's cheat sheet.

Table of Contents

Introduction

About This Book

Conventions Used in This Book

What You’re Not to Read

Foolish Assumptions

How This Book Is Organized

Part I: Getting Started with Estate and Trust Administration

Part II: Administering an Estate

Part III: Operating a Revocable or Irrevocable Trust

Part IV: Paying the Taxes

Part V: The Part of Tens

Icons Used in This Book

Where to Go from Here

Part I: Getting Started with Estate and Trust Administration

Chapter 1: Operating in a Fiduciary World

Identifying the Players

Determining an estate’s fiduciaries

Knowing who the trustees are

Lining up your team of advisors

Estate of Change: Delving into Estates

Altering the status quo

Probating an estate

Collecting the estate’s assets

Paying expenses and making distributions

Tying up the estate’s loose ends

Operating a Trust

Understanding your duties as trustee

Putting assets into trust

Putting the trust to work

Discovering the purpose of the trust

Compiling and organizing trust records

Bringing the trust to its conclusion

Paying Uncle Sam

Compiling the estate tax return

Figuring out the income taxes

Planning an income tax strategy

Whipping together Schedule K-1

Chapter 2: Exploring the Ins and Outs of Estates

Defining the Estate for Probate Administration Purposes

Will Power: Understanding How a Will (Or No Will) Affects an Estate

Dying testate

Dying intestate

Taking a Look at Who Can Inherit

Surviving spouse

Individuals omitted from the decedent’s will (including intentional disinheritance)

The other players: Devisees and legatees

Heirs-at-law

Defining the Estate for Tax Purposes

Transfer taxes

Other taxes

Chapter 3: Identifying Different Types of Trusts

Differentiating for Income Taxes: Grantor versus Non-Grantor Trusts

Grantor trusts

Non-grantor trusts

Intentionally defective grantor trusts

Creating Trusts during Lifetime and after Death

Trusts created during lifetime

Trusts created under a last will

Grasping Revocable Trusts

Still breathing: Living trusts

Tackling Totten Trusts

Going incognito: Nominee trusts

Understanding Irrevocable Trusts

Making gifts to an irrevocable trust

Getting the maximum tax benefit out of dying: Marital trusts

Protecting the estate tax exemption: Credit shelter trusts

Grandpa (or Grandma) knows best: Grandchildren’s trusts

Better safe than sorry: Insurance trusts

It’s only a name, not a description: Crummey trusts

Keeping a finger in the pie: Grantor-retained interest trusts

Exploring Charitable Trusts

Split-interest charitable trusts

Non-operating charitable foundations

Owning Subchapter S Shares in Trust

Qualified Subchapter S Trusts (QSSTs)

Electing Small Business Trusts (ESBTs)

Chapter 4: Assembling Your Team Members and Knowing When to Use Them

Finding What You Need to Go It Alone

Finding an Attorney

Knowing where to look

Asking the right questions

Discussing payment options

Finalizing your decision

Working with your attorney

Hiring a Tax Professional

Discovering where to look

Discussing payment options

Considering Help from Other Pros

Determining whether you need an investment advisor

Obtaining appraisers where necessary

Consulting with other miscellaneous pros

Recognizing Malpractice

Surveying why malpractice occurs

Covering your ass . . . ets

Part II: Administering an Estate

Chapter 5: Taking the First Steps after Death

Addressing the Immediate Concerns When Someone Dies

Honoring anatomical gifts

Having an autopsy performed

Arranging the Funeral

Making important decisions

Obtaining copies of the death certificate

Understanding How Death Changes Everything about the Decedent’s Assets

Bank accounts and the need for funds

Powers of attorney

Locating the Estate-Planning Documents

The Last Will and testament (The Will)

Trust agreements and amendments

Letters of intent

Other documents that dispose of property

Notifying Those Who Need to Be Notified

Creating Calendars and Files

Eyeing what kind of calendar to create

Setting up a filing system

Chapter 6: Navigating the Probate Process

Filing the Last Will with the Probate (Or Equivalent) Court

Figuring Out Whether Administration Is Necessary

Do you need a temporary executor?

Do you need a special administrator?

Determining domicile

Accessing ancillary administration

Deciding What Shape Your Probate Procedure Should Take

Taking small estate shortcuts

Traveling the traditional probate route

Taking Important First Steps after Your Appointment

Eyeing the Surviving Spouse’s Rights and Decisions Regarding Property

Exercising rights ahead of the provisions of the will

Electing against the will

Claiming dower

Chapter 7: Marshalling and Liquidating Assets

Understanding Why You Need to Determine What the Decedent Owned

Observing the Obvious: Big-Ticket Items

The bricks and mortar: Real estate

Things that move: Cars, boats, and cycles

Small (and closely held) businesses

Tracking Down All the Other Assets

Reading the mail

Perusing other personal papers

Finding the hiding places

Emptying the safe deposit box

Sleuthing for digital assets and info

Checking over prior tax returns

Listing Personal and Household Effects

Appraising the Property

Tangibles

Intangibles

Real estate

Contacting the Employer about Employee Benefits

Locating and Collecting Insurance Proceeds

Ascertaining Any Other Death Benefits

Preparing and Filing the Probate Inventory

Liquidating Assets

Selling stocks, bonds, and other securities

Disposing of real estate

Chapter 8: Paying the Debts, Expenses, Bequests, and Devises from the Estate

Determining and Paying Debts of the Decedent and Administration Expenses

Finding out how and when to pay claims

Prioritizing payment

Declaring the estate insolvent

Informing Potential Beneficiaries of Their Right to Consider Disclaimer

Segregating and Distributing Specific Property

Treading slowly before distributing

Making the distributions

Considering tangible property

Looking at intangible property

Fulfilling bequests of specific dollar amounts

Dividing Other Personal Property Equitably

Basing division on letter of intent

Creating a system for heirs to choose

Disposing of unwanted personal property

Slicing Up the Residue

Chapter 9: Closing the Estate

Obtaining Tax Closing Letters

Acquiring Releases of Lien for Real Estate

Paying Final Administration Expenses

Making Final Distributions to Residuary Beneficiaries

Preparing and Filing Final Estate Income Tax Returns

Readying Accounts for Allowance by the Probate Court

Using the appropriate form of accounting

Following the proper probate procedures

Remembering filing fees

Appointing a guardian ad litem, if needed

Filing a military affidavit, if necessary

Notifying the surety

Part III: Operating a Revocable or Irrevocable Trust

Chapter 10: Understanding the Trustee’s Duties

Getting Acquainted with the Trust Instrument

Creating a plan based on the trust’s terms

Identifying the players

Reforming the trust

Empowering the Trustee

Buying and selling assets

Determining distributions to beneficiaries

Hiring and firing advisors

Coloring Inside the Lines: Understanding Fiduciary Duty and Limitations

Exercising discretion

Obtaining errors and omissions insurance

Protecting the Trust’s Assets

Diversifying the assets

Asking for help

Preparing and Filing Annual Income Tax Returns and Accounts

Chapter 11: Funding the Trust

Putting Assets in Trust during Life

Signing It Over: Giving the Trust Asset Ownership

Cash and securities

Privately held stocks, promissory notes, and limited partnership interests

Real estate

Life insurance policies

Personal and household property in trust

Rolling Property into Trust after Death

Chapter 12: Investing the Trust’s Assets and Paying Its Expenses

Appreciating the Importance of Income and Principal in Trust Administration

Defining principal and income

Distinguishing between the two

Using Investment Advisors Effectively

Holding and Diversifying Assets

Stocks

Bonds

Mutual funds

Cash needs

Real estate

Small business stocks

Going Green in a Trust

Socially conscious

Politically aware

Looking to the Beneficiaries’ Needs

Age

Purpose of trust

Paying the Trust’s Expenses

Trustee’s fees

Investment advice

Accounting fees

Taxes

Chapter 13: Paying Trust Beneficiaries

Notifying Beneficiaries of the Trust

Obtaining addresses and Social Security numbers

Verifying dates of birth

Determining Scheduled Distributions

Figuring out how much to pay

Creating a payment schedule

Distributing When the Beneficiary Reaches a Specific Age

When Beneficiaries Request More Money: Paying Out Extra Distributions

Making the Decision to Distribute Discretionally: Eyeing the Trust’s Terms

Ensuring health and well-being

Paying for education

Buying a home

Starting a business

Using trustee discretion

Chapter 14: Creating and Keeping Trust Records

Creating a Filing System

Getting started: Organizing the right way

Keeping the trust instrument handy

Compiling correspondence

Filing financial records

Preserving annual accounts

Referencing tax returns

Preparing an Initial Inventory and Valuing the Assets

Arriving directly from the donor

Coming from the donor’s estate

Compiling Records of All Transactions

Knowing the difference between income and principal

Filing income tax returns annually

Producing Annual Trust Accounts

Assembling the desired information

Obtaining assents of beneficiaries

Filing with the probate court

Chapter 15: Terminating the Trust

Distributing All Assets According to the Trust Instrument

Calculating final income distributions

Holding back funds for final taxes and fees

Paying the remaindermen

Submitting the Final Income Tax Returns

Determining any final tax liability

Filing a short-year return

Preparing Final Accounting and Obtaining Assents of All Remaindermen

Finally finishing a non-probate trust

Polishing off a probate trust

Dealing with Outliers after the Trust Terminates

Part IV: Paying the Taxes

Chapter 16: Preparing the Estate Tax Return, Part 1

Figuring Out Which Estates Must File

Who must file

Who actually files Form 706 and when

Obtaining a Release from Personal Liability

Understanding Some of the Nitty-Gritty Rules for Filing Form 706

Where and how to file

How to pay the tax

Penalties for late filing, late payment, and understatement of valuation

Signature and verification

Extensions of time to file and pay tax

Supplemental documents

Completing the Form 706, Pages 1–4

Part 1: Decedent and Executor

Part 2: Tax Computation

Signature of executor(s)

Signature of preparer other than the executor

Part 3: Elections by the executor

Part 4: General Information

Part 5: Recapitulation

Part 6: Portability of Deceased Spousal Unused Exclusion (DSUE)

Being Ready for and Handling an Audit

Getting an Estate Tax Closing Letter

Chapter 17: Preparing the Estate Tax Return, Part 2

Tackling the Most Common Schedules

Focusing on real estate: Schedule A

Identifying stocks and bonds: Schedule B

Addressing mortgages, notes, and cash: Schedule C

Considering life insurance: Schedule D

Eyeing jointly owned property: Schedule E

Considering other property: Schedule F

Touching on funeral and administration expenses: Schedule J

Recording debts, mortgages, and liens: Schedule K

Listing net losses and such: Schedule L

Covering bequests to a surviving spouse: Schedule M

Recording charitable, public, and similar gifts and bequests: Schedule O

Knowing When to Ask for Help

Listing transfers during life: Schedule G

Exercising powers of appointment: Schedule H

Considering annuities: Schedule I

Claiming a credit for foreign death taxes: Schedule P

Getting a credit for tax on prior transfers: Schedule Q

Generation-Skipping Transfer tax: Schedule R

Electing a qualified conservation easement exclusion: Schedule U

Filing a protective claim for refund: Schedule PC

Chapter 18: Filing Income Tax Returns for a Decedent, Estate, or Trust

Before You Begin: What You Need to Do

Obtain a federal tax ID number

Choose a tax year-end

Calculating the Income

Interest

Dividends

Business income

Capital gains and losses

Income from rents, royalties, partnerships, and other estates and trusts

Farm income or loss

Ordinary gain or loss

Other income

Deducing Deductions

Interest

Taxes

Fiduciary fees

Charitable deductions

Attorney, accountant, and preparer fees

Miscellaneous itemized deductions

The Income Distribution Deduction (Schedule B)

The estate tax deduction

Taxes owed

Credits

Additional taxes

Answering the Questions on the Back of Page 2 (Form 1041)

Chapter 19: Weighing Income Tax Implications

Timing Payments In and Out of an Estate

Benefitting from the estate’s fiscal year

Balancing the estate’s taxable income against the beneficiary’s

Timing the receipt of income

Paying the ongoing expenses of the estate

Investing to Minimize Income Taxes

Limiting the fiduciary’s income taxes

Protecting the beneficiary

Introducing the Unearned Income Medicare Contribution (UIMC) Tax

Calculating the tax

Lessening the tax’s impact

Chapter 20: Reporting Tax Info on Schedule K-1

Understanding Schedule K-1

General information

Income items

Deductions and credits

Alternative minimum tax information

Allocating Types of Income on the K-1

Preparing Supplements to Schedule K-1

Showing foreign tax allocations

Providing state tax information

Creating Nominee Form 1099s

Part V: The Part of Tens

Chapter 21: Ten Pitfalls for the Unwary

Failing to Terminate an Existing Real Estate Purchase and Sale Agreement

Taking a Lump Sum Distribution from a Pension Plan, IRA, or Deferred Compensation Plan

Creating a Feeding Frenzy When Splitting Personal Property

Missing Court Deadlines

Forgetting Tax Filing Deadlines

Failing to Communicate with the Heirs and Legatees

Exercising Poor Fiduciary Judgment

Underestimating the Devotion Required

Taking Nonsanctioned Shortcuts

Paying from the Wrong Pocket

Chapter 22: Ten Types of Taxes You May Have to Pay

Federal Gift Tax

Federal Estate Tax

Generation-Skipping Transfer Tax

State Inheritance or Estate Tax

Estate and Trust Income Taxes (Federal and State)

Decedent’s Final Federal and State Income Taxes

Local Income Taxes

Local Real Estate Taxes

State Intangibles Taxes

Excise Taxes

Appendix A: Glossary

Appendix B: State-by-State Rules of Intestacy and Estate or Inheritance Tax

Cheat Sheet

Introduction

This country is aging. Fewer babies are being born, and people are living longer and longer. They’re also managing to accumulate more and more wealth. Wealth is relative; two generations ago, a middle-income family owned a house and maybe a car and perhaps even had a little money in the bank. Today, that scenario has become much more complicated. Many who would never consider themselves wealthy now own more than one home and have investments in the stock market, retirement accounts that continue on after death, and debt up to their eyeballs.

With this increased complexity in financial affairs comes a parallel complexity in transferring all these accumulated assets to the next generation(s), either at death or before. In the past, heavy-duty trusts were only for the very wealthy; today, they’ve become part of the legal landscape for ordinary Americans. And because ours is a do-it-yourself society in so many aspects, that I-can-do-it-myself attitude has carried over into trust and estate administration. Why, many people ask, should they pay someone else to do work that they themselves can perform just as well for a fraction of the cost?

And that’s why we wrote the second edition of this book. Between the two of us, we have more than 60 years of estate and trust administration experience. In that time, we’ve come across some unusual situations in our careers and devised ways to avoid standard pitfalls that await the unwary. We wrote this book to share with you some of this accumulated wisdom — and to help you avoid the mistakes that we’ve made (or narrowly avoided).

About This Book

Estate & Trust Administration For Dummies, 2nd Edition, is the practical reference for those who find themselves appointed as executor, administrator, or personal representative of an estate, or as trustee of a trust. In these pages, you can find advice on what to do — and what to avoid — as you acquire, manage, and dispose of assets that belong to the estate or trust you’re administering.

The world of estate and trust administration is one that can baffle you before you ever get out of the starting gate. You’re asked to make decisions literally before you’ve had the opportunity to process that your friend or family member has died. In those first days after a death, when so much of the world seems like it’s at sixes and sevens, you need to decide about the funeral, collect house keys, find the decedent’s last will — the list seems endless, and so are the opportunities to have seemingly innocuous items fall through the cracks.

That’s where this book comes in. We designed it to explain how you can administer an estate or trust by yourself. It gives you guidelines on what aspects of the work you can undertake on your own and which areas you really want to ask for an expert to help you.

Simply put, this book allows you to create and follow a road map toward successfully completing your appointed task without ripping out your hair and running into the streets screaming. You can use this book in a couple of ways:

As a reference: Everything’s here, whether you have questions about probate, taxes, or how to plan a funeral. The world of trusts and estates can seem complicated, but it’s all governed by common sense and rules (and plenty of them).

As an advisor: Some problems may seem unsolvable when you first confront them, but rarely is that truly the case. This book can help you find what questions you need to ask and who you should look to for answers. It gives you solid advice that you can literally take to the bank and lets you know when you would be better served by seeking professional advice.

We try to give you as complete information as possible, but trust and estate administration covers a lot of ground, much of it very complex. Still, we have to warn you that every situation is different, and periodically having a professional check your progress in administering any estate or trust is never a bad idea. At best, he or she will confirm that you’re doing a brilliant job; at worst, the pro will catch any mistakes you may be making before they have a chance to become really serious.

Conventions Used in This Book

To help you navigate this book, we use the following conventions:

Italic highlights words or terms that are being defined. (We also use it occasionally for emphasis.)

Boldface indicates keywords in bulleted lists or the action parts of numbered steps. It also flags the names of specific tax documents so you can find them easily in any discussion.

Monofont tells you that you're looking at a Web address.

What You’re Not to Read

We’d love for you to read every single word we wrote, but we’re also realistic and understand that you probably only have time for just the need-to-know information. If you’re overwhelmed and want just the essentials, you can skip anything marked with a Technical Stuff icon; all you’ll miss is some overly technical gibberish.

Foolish Assumptions

The world of estates and trusts is rife with assumptions, foolish and otherwise. Here are some of the assumptions we made about you:

You’re not a professional trustee or executor, or a trust or estate administrator already (although even if you are, you should still find the information in this book helpful).

You probably have no idea what you bit off when you agreed to act as either an executor or trustee, but you’re eager to find out.

You’re not scared of hard work, both physical and mental, and you’re not afraid to delegate. You can do much of what needs to be done in administration yourself, whether it’s prying up floorboards in search of the secret money stash or creating a probate account, but you recognize that sometimes paying someone else to do a task you feel unprepared to tackle makes perfect sense.

How This Book Is Organized

It really wasn’t difficult to organize this book because it naturally split itself into its component parts: defining a whole lot of terms and types of trusts you may not be familiar with, estate administration, trust administration, and finally transfer tax and income tax issues. The following sections outline the contents of each part.

Part I: Getting Started with Estate and Trust Administration

What we both discovered when we first landed in law offices and started administering estates and trusts was that lawyers, judges, and just about everyone else involved spoke in code. Not only did they use words such as whereas and hereunder in general conversation, but they also threw around terms such as administratrix, CRATs, CRUTs, GRITs, and QPRTs like confetti at a wedding. In this part, not only do we give you the terminology that any executor or trustee worth his or her weight knows but we also explain who all the players are in estates and trusts (and, in the case of trusts, exactly what games are being played).

Part II: Administering an Estate

Administering an estate is a multistep — sometimes simultaneous-step — operation that requires an eye for detail and sometimes a great deal of patience. In this part, we take you from soup to nuts: figuring out what the decedent owned (and owed), locating the necessary documents, figuring out who inherits, shepherding the estate through the probate process (if necessary), distributing what’s left after everyone who has a claim against the estate has been paid, and closing the estate for good. It may seem like a monumental task, but taking it one step at a time, even if those steps go in directions you don’t want them to, inevitably leads you to your desired conclusion.

Part III: Operating a Revocable or Irrevocable Trust

Your duties as a trustee are different from the duties of an executor, and the scope of the work is generally less intense, although it takes longer. In this part, we acquaint you with what powers you have as trustee and what duties you’re expected to perform. We explore your relationship to the trust’s beneficiaries and how to keep it cordial. Plus, we explain how to keep the necessary records and how to terminate the trust after its job is done.

Part IV: Paying the Taxes

Because the IRS considers trusts and estates separate entities, you have the enviable task of making sure that you file all necessary tax returns on time. We walk you through preparation of a simple estate tax return (Form 706) and through the annual income tax returns for trusts and estates (Form 1041). We also explain what you need to know to prepare the decedent’s final Form 1040. Finally, we show you how to report to beneficiaries any income you may have distributed to them so they in turn can declare that information on their Form 1040.

Part V: The Part of Tens

What would a For Dummies book be without the Part of Tens? In this part, we reveal ten mistakes that are easy to make but even easier to avoid with just a little planning, as well as the ten different types of taxes a trust or estate may be liable for. And, in case that wasn’t enough, we’ve also included two appendixes. The first is a glossary. The second is a state-by-state list of basic rules of intestacy (dying without a valid last will), plus current state estate tax rules (and where you can find more information and forms, if necessary). Just a quick note of caution: The intestacy rules are far more complex than what we were able to include in the appendix. If you’re administering an intestate estate, be sure to consult with the probate court or a qualified attorney as to the disposition of that particular estate.

Icons Used in This Book

The little pictures in the margins are icons. Here’s what they mean:

So much to remember, so little time: This icon alerts you to important information you really don’t want to ignore.

Of course, you want to manage all the administration tasks yourself. But some you’re just not qualified for, and others — take our word for it — you really do want to have someone who knows cast a hairy eyeball over. When you see this icon, you’ve just come across an item we suggest you don’t attempt without assistance.

Estate and trust administration can get pretty technical. This icon points out specific information regarding rules, regulations, and especially Internal Revenue Code references.

We’ve picked up lots of techniques through hard experience, and we’re happy to share them with you. This icon points out administration gems that will make your life easier. Remember, though, that not every trust or estate will need every tip that comes your way; make sure that a tip applies to your situation before you use it.

This icon tells you what to avoid when administering a trust or estate.

Where to Go from Here

This book isn’t intended as a must-read-cover-to-cover sort of tome, nor will you be able to pass a trusts and estates course in law school just because you read it. You may choose to read only what interests you and ignore the rest. You can get in and get out wherever and whenever you choose. If important information relating to a particular topic is located elsewhere, the text will send you there, so you never need to worry that you’re missing basic information because you skipped a portion of the book. Of course, you may discover that it’s just a page turner, and every topic fascinates you, in which case you may want to apply to law school posthaste (after you finish the book, of course).

Part I

Getting Started with Estate and Trust Administration

Visit www.dummies.com to learn more and do more with For Dummies.

In this part . . .

Find out what’s involved in being an executor, administrator, personal representative, or trustee, including the terminology, who’s who, and the basics of your responsibilities.

Discover the difference between what constitutes an estate for probate and for estate tax purposes, what to do if there is — or isn’t — a will, and how to figure out who can inherit.

Get up to speed on the different kinds of trusts, how to identify them, and their purposes.

Start assembling your administration support team, if necessary, including attorneys, accountants, and other experts.

Chapter 1

Operating in a Fiduciary World

In This Chapter

Becoming comfortable with the terminology surrounding estates and trusts

Encapsulating estates and taking care of trusts

Preparing and filing tax returns for trusts, estates, and decedents

You may have known for a while that someone close to you has named you as the executor of his or her will, as the trustee of a trust he or she’s created, or even as both. That knowledge may make you feel extremely honored while that person’s alive and kicking and still able to look after his or her assets.

Those warm and fuzzy feelings may come crashing to a halt, though, the day you hear that your friend has passed away, and you’re now in charge of the show. All eyes will be on you as you pick up the reins and try to keep this buggy called an estate or trust moving along at a steady clip, while keeping all the promises written down during your friend’s lifetime. The responsibility is huge, but so is your potential satisfaction, as you honor his wishes after he is no longer around to appreciate your actions.

This chapter is a jumping-off point for understanding what an estate administrator or trustee actually does: assumes control of someone else’s affairs in a way that’s both sensitive to family dynamics and responsive to family needs. Mishandled, estate and/or trust administration can cause permanent family rifts; on the other hand, competent and careful management helps keep family memories happy and purpose intact.