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Income-Producing Assets in Estates and Trusts

Posted on: January 26th, 2017
estate income taxCertain tax forms are required for estates and trusts that earn income. The executor or trustee is responsible for identifying necessary forms, completing proper accounting, and filing and paying any tax due by the deadline. 

Following the decedent’s death, the estate may earn, or otherwise receive, income. The executor’s inventory during estate administration can help to identify and record taxable assets. Examples of estate income and income-producing assets in estates include:
  • Interest on decedent’s financial accounts
  • Commissions, salaries, and wages due to the decedent
  • Rental income from decedent’s properties

Trust principal may rise if the grantor makes contributions, transfers in accumulated income, or the trust receives a settlement. Trusts accrue income such as:
  • Dividends/interest from accounts held in trust
  • Lease/rental payments from real property in trust
  • Sale of trust property
  • Business income for business interests held in trust

All estate and trust income in excess of $600 must be documented and reported on a Form 1041. Our tax lawyers prepared a few tips for completing the Form 1041. Errors, even unintentional ones, could prompt fines and penalties. Executors and trustees can help to prevent inaccuracies by retaining the counsel of a tax lawyer.

Proper accountings must be maintained throughout estate and trust administration. Whether calculating and submitting quarterly estimated tax payments, or completing annual state and federal tax forms, seek legal counsel. Contact an attorney for help with the Form 1041 or to discuss other probate or trust administration tax matters.
 
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