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Tax returns, critical dates, deadlines trustees should know

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:

  • Lodging a pour over will with the county clerk must take place within 30 days from the date of death.
  • Serving notification by trustee on each trust beneficiary and heir of the deceased settlor must take place within 60 days from the date of death.
  • Filing IRS Form 706 (Federal estate tax return) or extension thereof is due 9 months after the date of death.
  • Filing IRS Form 709 (gift-GST tax return) is due April 15 in the year following the gift or 9 months after the date of death, whichever is earlier, or the extension date.
  • Medi-Cal notice to California Department of Health Services is due 90 days from the date of death if:
    • Settlor received or may have received Medi-Cal care benefits, or
    • Was the surviving spouse of a person who received benefits.
  • Date for filing settlor’s final personal income tax return is April 15 in the year following the date of death or the extended deadline date of October 15 if an extension is applied for.
  • Date for filing fiduciary income tax return is the 15th day of the 4th month following the fiscal year end or extension date. Most trusts will elect calendar year ends so April 15 in the year following the date of death or the extended deadline date of October 15 if an extension is applied for.
  • Creditors have 4 months from date of first publication of notice to creditors to file a claim.
  • The deadline for determining beneficiaries of retirement plans or IRAs is September 30th in the year after the year of decedent’s death.
  • Within 30 days of learning of the testator’s death, the custodian of decedent’s original will must:
    • Lodge the original will with the clerk of the county where decedent resided at the time of death, and
    • Mail a copy of the will to the named executor (Note: this rule applies even if no probate is required)

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.