Estate and Trust Administration For Dummies PDF
Preview Estate and Trust Administration For Dummies
Estate & Trust Administration FOR DUMmIES ‰ by Margaret Atkins Munro, EA, and Kathryn A. Murphy, Esq. 0011__228866117733--ffffiirrss..iinndddd ii 1100//2222//0088 88::0088::3377 PPMM 0011__228866117733--ffffiirrss..iinndddd iivv 1100//2222//0088 88::0088::3377 PPMM Estate & Trust Administration FOR DUMmIES ‰ by Margaret Atkins Munro, EA, and Kathryn A. Murphy, Esq. 0011__228866117733--ffffiirrss..iinndddd ii 1100//2222//0088 88::0088::3377 PPMM Estate & Trust Administration For Dummies® Published by Wiley Publishing, Inc. 111 River St. Hoboken, NJ 07030-5774 www.wiley.com Copyright © 2009 by Wiley Publishing, Inc., Indianapolis, Indiana Published by Wiley Publishing, Inc., Indianapolis, Indiana Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600. 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Library of Congress Control Number: 2008939700 ISBN: 978-0-470-28617-3 Manufactured in the United States of America 10 9 8 7 6 5 4 3 2 1 0011__228866117733--ffffiirrss..iinndddd iiii 1100//2222//0088 88::0088::3377 PPMM 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 taxa- tion. She’s an Enrolled Agent, licensed by the federal government to repre- sent clients in the areas of tax and tax-related issues, and currently operates a widely diverse private practice that specializes, among other areas, in trust and estate accounting and income taxation. A classic example of living a life that doesn’t follow the plan set out in college, Peggy received a B.A. in history from The Johns Hopkins University, and has also attended University College, Cork, and the Pontifical Institute of Mediaeval Studies in Toronto. She resides with her family in Vermont. Peggy is the author of 529 & Other College Savings Plans For Dummies, and the co-author 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, 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’ experi- ence in the fields of estate planning and administration, including drafting of sophisticated estate plans and prenuptial agreements for high-net-worth indi- viduals. 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 is a graduate of The University of Michigan, with an A.B. 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. In her spare time she teaches, and is an active member of A Better Life/Moldova, an organization devoted to improving the lives of abandoned children in Moldova (www. abetterlifemoldova.com). Kathy is the co-author 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. Her writing is an outgrowth of two of her loves: literature and the law. 0011__228866117733--ffffiirrss..iinndddd iiiiii 1100//2222//0088 88::0088::3377 PPMM 0011__228866117733--ffffiirrss..iinndddd iivv 1100//2222//0088 88::0088::3377 PPMM 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 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 Jim Casement, our copy editor Megan Knoll, and especially to Chad Sievers, our project editor, who was patience personified as we handed him chapters that were hugely longer than scheduled. We could hear him gulping on the other end of the phone, but he never complained. We’ve both had many mentors over the years, among them Palmer Worthen and Frederick 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 Fiduciary Department at Goulston & Storrs, PC, where the two of us met 19 years ago and began our long friendship. Last, but certainly not least, our gratitude to Melinda Haskins, who assisted us in so many important ways. This book is as much a testament to her efforts as it is to our own. 0011__228866117733--ffffiirrss..iinndddd vv 1100//2222//0088 88::0088::3377 PPMM Publisher’s Acknowledgments We’re proud of this book; please send us your comments through our Dummies online registration form located at www.dummies.com/register/. Some of the people who helped bring this book to market include the following: Acquisitions, Editorial, and Media Composition Services Development Project Coordinator: Katie Key Project Editor: Chad R. Sievers Layout and Graphics: Samantha Allen, Acquisitions Editor: Mike Baker Christin Swinford Copy Editor: Megan Knoll Proofreaders: John Greenough, Bonnie Mikkelson Assistant Editor: Erin Calligan Mooney Indexer: Broccoli Information Management Technical Editor: Jim Casement, Esq., CPA, CFP, CFS, PFS Editorial Manager: Michelle Hacker Editorial Assistants: Joe Niesen, David Lutton, Jennette ElNaggar Cover Photos: © Gregor Schuster/zefa/Corbis Cartoons: Rich Tennant (www.the5thwave.com) Publishing and Editorial for Consumer Dummies Diane Graves Steele, Vice President and Publisher, Consumer Dummies Joyce Pepple, Acquisitions Director, Consumer Dummies Kristin Ferguson-Wagstaffe, Product Development Director, Consumer Dummies Ensley Eikenburg, Associate Publisher, Travel Kelly Regan, Editorial Director, Travel Publishing for Technology Dummies Andy Cummings, Vice President and Publisher, Dummies Technology/General User Composition Services Gerry Fahey, Vice President of Production Services Debbie Stailey, Director of Composition Services 0011__228866117733--ffffiirrss..iinndddd vvii 1100//2222//0088 88::0088::3388 PPMM Contents at a Glance Introduction ................................................................ 1 Part I: Discovering the World of Estates and Trusts ........ 7 Chapter 1: Functioning in a Fiduciary World .................................................................9 Chapter 2: Estates 101: Exploring the Ins and Outs of Estates ..................................19 Chapter 3: The Lowdown on Trusts: Identifying the Different Types .......................31 Chapter 4: Assembling Your Team Members and Knowing When to Use Them.....55 Part II: Administering an Estate ................................. 69 Chapter 5: Taking the First Steps after Death ..............................................................71 Chapter 6: Navigating the Probate Process ..................................................................87 Chapter 7: Marshalling and Liquidating Assets .........................................................103 Chapter 8: Paying the Debts, Expenses, Bequests, and Devises from the Estate ..125 Chapter 9: Closing the Estate .......................................................................................137 Part III: Operating a Revocable or Irrevocable Trust ... 147 Chapter 10: Understanding the Trustee’s Duties ......................................................149 Chapter 11: Funding the Trust .....................................................................................159 Chapter 12: Investing the Trust’s Assets and Paying Its Expenses .........................171 Chapter 13: Paying Trust Benefi ciaries .......................................................................191 Chapter 14: Creating and Keeping Trust Records .....................................................205 Chapter 15: Terminating the Trust ..............................................................................219 Part IV: Paying the Taxes ......................................... 229 Chapter 16: Preparing the Estate Tax Return, Part 1 ................................................231 Chapter 17: Preparing the Estate Tax Return,Part 2 .................................................251 Chapter 18: Filing Income Tax Returns for a Decedent, Estate, or Trust ...............275 Chapter 19: Reporting Tax Info on Schedule K-1 .......................................................299 Part V: The Part of Tens ........................................... 309 Chapter 20: Ten Pitfalls for the Unwary ......................................................................311 Chapter 21: Ten Types of Taxes You May Have to Pay ............................................317 0022__228866117733--ffttoocc..iinndddd vviiii 1100//2222//0088 88::0099::3333 PPMM Appendix A: Glossary ............................................... 323 Appendix B: State-by-State Summary of Probate, Estate, or Inheritance Tax, and Rules of Intestacy ...... 333 Index ...................................................................... 357 0022__228866117733--ffttoocc..iinndddd vviiiiii 1100//2222//0088 88::0099::3333 PPMM
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