Estate planning: Is a trust beneficial?

Use the tips below to determine whether or not setting up a trust is best for you.

The trustee must be qualified to administer the trust properly. The trustee must be willing to handle the responsibilities of a trustee of which there are many. Being a trustee is a task which should not be taken lightly. A trustee is responsible for a number of obligations including maintaining permanent records, making investment decisions, reading and interpreting the provisions of the trust document, making sure that the annual fiduciary income tax returns are filed in a timely manner and making distributions in accordance with the terms of the trust. The trustee must engage a CPA who is familiar with the IRS trust compliance rules and the state trust accounting rules. This may be a cost that you should consider before you establish a trust.

A trust may be a useful estate-planning tool for your family if you have a significant worth and feel that you need a trust for good reasons such as:

You want to leave your estate to your heirs in a way that is not directly and immediately payable to them upon your death. For example, you may want to stipulate that they receive their inheritance in three parts, or upon certain conditions being met, such as graduating from college;

You want to arrange for the support of you’re surviving spouse, but also want to insure that the principal or remainder of your estate goes to your chosen heirs (e.g., your children from a first marriage) after your spouse dies;

You and your spouse want to maximize your estate-tax exemptions;

You have a disabled relative whom you would like to provide for without disqualifying him or her from Medicaid or other government assistance.

You have a real property in multiple jurisdictions. If you transfer the title from your name to the trust you must have casualty insurance insuring the trust as the owner of the real property.

Among the chief advantages of trusts include:

Placing conditions in the trust on how and when your assets are distributed after you die;

Reduce estate and gift taxes;

Distribute assets to heirs efficiently without the cost, delay and publicity of probate court;

Better protection of your assets from creditors and lawsuits;

Always name successor trustees who are qualified to take over if the prior trustee is unable to carry out the trustee duties for any reason.

Trusts are flexible, varied and complex. Each type has advantages and disadvantages, which you should discuss thoroughly with your estate-planning attorney before setting one up.

One caveat:  Assets you want in a living trust should be retitled in the name of the trust. Anything that is not so titled when you die will have to be subject to probate.

For a trust in which you want to put the majority of your assets — known as a revocable living trust — you also have to have a “pour-over will” to cover any of your holdings that might be outside of your trust if you die unexpectedly. A pour-over will essentially directs that any assets outside of the trust at the time of your death be put into it.

Credit-shelter trust: With a credit-shelter trust (also called a bypass or family trust), you write a will bequeathing an amount to the trust up to but not exceeding the estate-tax exemption. Then if you wish you can pass the rest ofyour estate to your spouse tax-free. You also specify how you want the trust to be used — for example, you may stipulate that income from the credit-shelter trust after you die goes to your spouse and that when he or she dies,the principal will be distributed tax-free among your children.

Since your spouse is also entitled to an estate-tax exemption, the two of you can effectively double that portion of your kids’ inheritance that is shielded from estate taxes.

And there’s an added bonus: Once money is placed in a bypass trust it is forever free of estate tax, even if it grows. So if the trustee invests it wisely,this may add to your children’s inheritance.

Of course, you can pass an amount equal to the estate-tax exemption directly your kids when you die, but the reason for a bypass trust is to protect your spouse financially in the event he or she has need for income from the trust orin the event you think your children will squander their inheritance before the surviving parent dies.

What CPAs Should Know About Trusts

What CPAs Should Know About Trusts

MARCH 2, 2016

Many estate planners recommend that clients create trusts for various reasons, but problems can arise when the trustee is a family member who has no experience regarding the responsibilities of a trustee.

In many cases the trustee selected by the creator of the trust is not capable of handling the responsibilities that are involved in administering a trust. The trustee should always engage a qualified CPA to assist in administering the trust.

The trustee is subject to a number of obligations, including maintaining adequate records, making investment decisions, reading and interpreting the provisions of the trust document, making sure the annual fiduciary income tax returns are filed in a timely manner, and making distributions in accordance with the terms of the trust.

There are several reasons for creating trusts. They can include protecting assets, providing for minors or beneficiaries who cannot handle funds, saving on estate taxes, preventing the wasting of trust assets, anticipating a will contest, elder law planning, and avoiding ancillary probate proceedings if real property is located in multiple jurisdictions.

Accountant’s Role
In order for the accountant to do justice for the trustee, the accountant must have a certain level of knowledge. Initially the accountant must read and understand the terms of the trust in order to properly prepare a fiduciary income tax return for the trust.

In addition, the accountant who prepares a fiduciary income tax return for the trust should be well-versed in the trust accounting rules that apply under state trust law.

This author, in practice, advises the client to seek the services of a CPA who is knowledgeable in both the Internal Revenue Code’s trust compliance rules, from a tax preparation point of view, as well as the state trust accounting income and principal rules.

The client often decides to use his or her own tax return preparer to handle the trust tax preparation work. Unfortunately, that is not always the best solution. Here are a few examples that I have run into:

1. The accountant fails to read the trust document, or the client trustee doesn’t even give a copy of the trust document to the accountant.

2. The accountant fails to realize that the trust mandates that the accounting income of the trust must be paid each year to the trust beneficiary.

3. The accountant erroneously has the trust pay the fiduciary income tax liability on the trust income at the trust rates, despite the fact that the trust mandated the trust income be paid out to the trust income beneficiary each year. (Note that capital gains are generally not considered to be accounting income under state trust law.)

4. The accountant fails to tell the trustee to write a check to the trust beneficiary each year when the trust requires that the trust accounting income be paid to the trust beneficiary at least annually.

5. In many trusts, it turns out that the trust beneficiary never received the correct accounting income or the proper trust distributions from the trust. The reason for that is simple; no one ever told the trustee that he/she was required to pay out the accounting income from the trust to the trust beneficiary.

6. According to the law and the IRS, any unpaid accounting income that should have been paid out to the trust beneficiary, as determined on the date of death of the trust beneficiary, is an asset of the trust beneficiary’s estate.

7. In a number of trusts, the tax basis of the trust assets that were initially received to fund the trust was not adequately tracked by the accountant for the trust. That can become an issue when those trust assets are sold many years later, or when those trust assets are ultimately transferred to the trust remainderman on termination of the trust.

The accountant for the trust should not only file fiduciary income tax returns but should agree to maintain books and records for the trust.

Other issues to watch out for in this area:

• When the trustee resigns, becomes disabled or dies, the potential successor trustee may not wish to accept the trusteeship appointment without receiving a full accounting from the prior trustee or the legal representative of the prior trustee.

• The court that has jurisdiction over the trust may require that an accounting be made to the potential successor trustee as well.

• Upon the termination of the trust, the trustee may be required to do a full accounting in order to obtain a release from the trust remainderman beneficiaries. The bottom line is that the accountant for the trust should be engaged to do more than just the tax preparation of the trust fiduciary income tax return.

Many accountants have not received any training (such as CPE programs) on the state accounting income and principal rules that apply to trusts. The CPE programs involving trusts normally concentrate on fiduciary trust income tax preparation.

If the accountant for the trust concentrates solely on trust compliance from an IRS tax preparation point of view, then the trustee may later need to engage another CPA who is knowledgeable in the state trust accounting income and principal rules. The trustee should consider engaging an accountant from the inception who knows both the trust compliance rules from a tax preparation point of view and the state-specific trust accounting income and principal rules that apply to the trust.

Recently, I was engaged to review trust compliance from an IRS and trust accounting point of view for a trust that was in existence for over 10 years. I discovered the trustee was wrongfully withdrawing funds from the trust principal without any legal authority to do so. The accountant for the trust never reviewed the trust document. The trustee erroneously thought that since she was the trustee and the trust was for her benefit, she could do whatever she wanted with the trust assets.

I have found many IRA trusts are noncompliant from an IRS point of view and a state trust accounting point of view. Basically an IRA trust is a trust that is the beneficiary of an IRA account.

Many accountants are not familiar with the rules that apply when an IRA is payable to an IRA trust. These trusts are often recommended and drafted by attorneys for asset protection and estate planning purposes.

There is a significant need for CPE organizations, including most state societies, to offer programs on the state-specific trust accounting income and principal rules that apply to trusts. This is necessary to avoid headaches for CPAs who are involved in preparing trust tax returns.

Seymour Goldberg, CPA, MBA, JD, is a senior partner in the law firm of Goldberg & Goldberg, P.C., in Melville, N.Y. He is Professor Emeritus of Law and Taxation at Long Island University. He has taught many CLE and CPE programs at the state and national level as well as CLE courses for the New York State Bar Association, City Bar Center for Continuing Legal Education, NJICLE, local bar associations and law schools. He has been quoted in major publications including The New York Times, Forbes and The Wall Street Journal and has been interviewed on CNN, CNBC and CBS. Mr. Goldberg is a member of the IRS Long Island Tax Practitioner Liaison Committee and the Northeast Pension Liaison Group. He was formerly associated with the Internal Revenue Service and has been involved in conducting continuing education outreach programs with the IRS. He is the chairman of the Estate & Financial Planning Committee of the Suffolk Chapter of the New York Society of CPAs. He is the author of Fundamentals of Trust Accounting Income and Principal Rules under the Revised New York State Laws and Can You Trust Your Trust? What You Need to Know about the Advantages and Disadvantages of Trusts and Trust Compliance Issues, available on and the American Bar Association at


New Publications


What You Need to Know about the Advantages and Disadvantages of Trusts and Trust Compliance Issues Trusts are often worthwhile but can be nightmares if improperly administered. As a result of the revamping of many state trust laws, trustees often find themselves with more questions than they were ever prepared for, without easily discernible answers, such as: • How do I know if I can trust my trust? • What should I look out for? • Are there ever occasions where I shouldn’t provide for a long-term trust? • What should I look for when selecting an institutional trustee to administer my trust? • What trustee liability issues should I be aware of? This is the first book of its kind to present answers to questions such as these in an accessible and practical manner, easily understood by you and your trust advisors. It advises you on the benefits—as well as the pitfalls—of acting as a trustee, written in language that doesn’t require a law degree to understand. 2014, 183 PAGES, PAPERBACK OR EBOOK. ISBN: 978-1-62722-709-4 PRODUCT CODE: 1620626 $24.95 LIST PRICE, $19.95 ABA MEMBERS

INHERITED IRAS What Every Practitioner Must Know, 2015 Edition

Many taxpayers have accumulated considerable assets in their 401(k) accounts or other types of qualified retirement plans. In rolling over these assets from an employer-sponsored plan into a rollover IRA without a full understanding of the implications to their beneficiaries, the result can be a morass of penalties and complications. This current, accessible resource explains these rules and provides guidance for effectively implementing an estate plan that includes retirement assets. Clearly written and logically organized, the guide includes more than 100 scenarios, questions, and answers that practitioners are most likely to encounter when dealing with retirement asset distributions. Checklists and sample forms provide additional tools and resources to help your clients through what is often a difficult time in their lives. 2015 173 PAGES, PAPERBACK OR EBOOK. ISBN: 978-1-63425-002-3 PRODUCT CODE: 1620656 $99.95 LIST PRICE, $74.95 ABA MEMBERS


In New York State alone there are well over 10,000 attorneys involved in trust drafting, tax planning, estate planning, trust accounting, trust litigation and elder law planning, but very little practical material on trust accounting income has been available—until now. This book provides a user manual on the trust accounting income and principal rules written from a practical application standpoint. It’s doubly applicable to any lawyers who draft trust documents. This guide supplies all the important New York State-specific trust information that any lawyer involved in trust drafting in the state needs. 2014, 196 PAGES, PAPERBACK. ISBN: 978-1-61438-851-7 PRODUCT CODE: 1620597 $99.95 LIST PRICE, $84.95 ABA MEMBERS ESSENTIAL INFORMATION FOR PRACTITIONERS DEALING WITH TRUSTS AND INHERITANCES BY SEYMOUR GOLDBERG, CPA, MBA, JD Now on Twitter! @InfoGoldbergira ESPECIALLY FOR NEW YORK


Discover the mistakes that are made by IRA account holders from an IRS compliance point of view with this essential guide! Learn about the potential IRA violations that may be triggered, and about the possible pitfalls that may befall clients who may inadvertently have violated these complex rules. The book also provides information to help you deal with your clients’ fears of a pending audit. Topics covered include: required minimum distribution penalties; important distribution tax traps to be aware of; asset protection for inherited IRAs; and more. Includes a valuable IRA trust checklist with Practitioner Tips. 2013, 174 PAGES, PAPERBACK OR EBOOK. ISBN: 978-1-61438-851-7 PRODUCT CODE: 1620533 $99.95 LIST PRICE, $74.95 ABA MEMBERS Available at or Follow on Twitter @InfoGoldbergira

Why do I need a will ?

Why do I need a will?

The court decides who gets assets in your name alone, if you don’t have one:

A will is a document that allows you state who you want to get your assets. A will is a document that specifies who will inherit your bank accounts, real estate, jewelry, cars, and other property after you die. In the event that you die without an executed Will the laws of your state will decide who gets what, without regard to your wishes or your heirs’ basic needs and requirements.

Intestacy laws apply in the event that you pass away without a will and the laws vary considerably from state to state. In such event, if you die and leave a spouse and children, your assets will be divided between your surviving spouse and children. If you are not married and don’t have any children, then your state is likely to decide who among your blood relatives will inherit your estate. A family tree or pedigree chart representing family relationships will be used in determining who the heirs are who will receive your estate assets that were not covered in the Will.

If you have children, you want to decide how and when they will receive your assets:

One of the most important reasons to make a will is for individuals or couples with minor children, because they are the best and fastest way to appoint guardianship of minors. You can designate a guardian to care for your children if you die before they become legal adults as well as naming a trustee to manage your money for your children until they reach adulthood. In addition, trusts can be created under your Will to safeguard, protect and invest the estate assets until your child attains age 18, 21 or any other age that you decide.

Executor duties

Executor duties

You must name an executor in your will. The executor pays your debts and taxes and then makes sure the rest of your estate is distributed according to the terms stated in your will.

Duties of the executor:

Ensure that all the real and personal property is protected, including arranging, if necessary fire insurance on buildings and changing locks to protect assets.

Locate safety deposit boxes access keys.

Select the lawyer to act for the estate and obtaining certified copies of the death certificate. Discuss the lawyers and accountants fees and disbursements right up front.

Locate all life insurance policies and notify the insurance company of the death and forward a copy of the death certificate to have the policy paid to the beneficiary. 
This is something that the attorney can handle.

Notify all insurance companies including house insurance and car insurance of the death. Ensure that insurance is maintained appropriately, make a list of all the assets and including stocks, bonds, pension funds, bank accounts, government investments, work related life insurance or benefits for the spouse.

Locate all copies of any designation of beneficiary forms for retirement accounts as well as any accounts that are POD (payable on death)

Determine any interests in entities and obtain shareholder and partnership agreements. Specific options may be time sensitive and must be adhered to accordingly.

Locate the previous three years of income tax returns and provide copies to the lawyer. These must be reviewed quickly to ensure that no filing dates are missed. Government tax authorities do not care that the person is deceased. The executor may be personally liable for any tax penalties that are incurred because filing dates are missed.

Pay debts or make arrangements to have them paid when estate funds become available. Keep careful records of all income and expenses during the administration of the estate.

Make a list of all debts. This will include accounts for charge cards, house utilities, property tax arrears, income tax arrears, loan payments, outstanding leases, and mortgages on house or vehicles, alimony or prior separation agreement. Provide this list and supporting documentation to the lawyer.

Once all the assets have been located and the debts paid then the estate will be disbursed in accordance with law and the terms of the Will.

You will need to notify the beneficiaries about their bequest and provided there is money left after the payment of all debts, the beneficiaries will receive their money or assets from the Executor of the estate.

The executor will need to open up an estate bank account in the name of the Estate. Most banks require the certificate of appointment of the executor by the court, a certified copy of the death certificate, the estate tax identification number.