As early in the process as possible you should decide whether to obtain an extension to file of Form 706 and/or pay the tax if the trust administration is started late (e.g. when the successor trustee has delayed several months before seeking professional assistance). After dong so, determining what returns need to filed by inquiring into whether the decedent’s previous years’ personal returns were filed as required, and whether any income tax returns are required in states other than the state where decedent was domiciled (e.g. for income-producing real property located in another state). Next, you must decide the appropriate reporting periods for income tax purposes 1) Final (short year) personal return (January 1 through date of death), and 2) The first short year return for the trust (date of death through December 31st). As a general rule, trusts are required to pay quarterly estimated taxes. However, when the settlor’s will provides for the estate residue that is not titled in the name of the trust to be poured over to a trust, an administrative trust operating in lieu of a probate estate qualifies for a 2-year exemption from quarterly estimated tax payments.
There are several important dates for critical actions to be aware of during a trust administration:
Additionally, a certification of trust and affidavit of death of trustee must be prepared and contain an abstract of the trust summarizing the trust provisions that include the identity of the trustee, and the trustee powers. Moreover, forms must be prepared for the County Assessor’s Office. These forms include the preliminary change of ownership report (PCOR), which must be filed even in non-probate transfers, when an interest in real property is transferred by reason of death “including a transfer through the medium of a trust,” within 150 days after the date of death. Finally, it is practical to prepare the application for the parent-child exclusion or the grandparent-grandchild exclusion from reassessment at the same time.