Estate & Trust Administration For Dummies

389 Pages·2008·3.4 MB·English

by  Margaret Atkins Munro

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 [phone].
Requests to the Publisher for permission should be addressed to the Legal Department, Wiley Publishing,
Inc., 10475 Crosspoint Blvd., Indianapolis, IN 46256, 317-572-3447, fax [phone], or online at http://
www.wiley.com/go/permissions.
Trademarks: Wiley, the Wiley Publishing logo, For Dummies, the Dummies Man logo, A Reference for the
Rest of Us!, The Dummies Way, Dummies Daily, The Fun and Easy Way, Dummies.com, Making Everything
Easier, and related trade dress are trademarks or registered trademarks of John Wiley & Sons, Inc. and/
or its affi liates in the United States and other countries, and may not be used without written permission.
All other trademarks are the property of their respective owners. Wiley Publishing, Inc., is not associated
with any product or vendor mentioned in this book.
LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: THE PUBLISHER AND THE AUTHOR MAKE NO
REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE
CONTENTS OF THIS WORK AND SPECIFICALLY DISCLAIM ALL WARRANTIES, INCLUDING WITHOUT
LIMITATION WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. NO WARRANTY MAY BE
CREATED OR EXTENDED BY SALES OR PROMOTIONAL MATERIALS. THE ADVICE AND STRATEGIES
CONTAINED HEREIN MAY NOT BE SUITABLE FOR EVERY SITUATION. THIS WORK IS SOLD WITH THE
UNDERSTANDING THAT THE PUBLISHER IS NOT ENGAGED IN RENDERING LEGAL, ACCOUNTING, OR
OTHER PROFESSIONAL SERVICES. IF PROFESSIONAL ASSISTANCE IS REQUIRED, THE SERVICES OF
A COMPETENT PROFESSIONAL PERSON SHOULD BE SOUGHT. NEITHER THE PUBLISHER NOR THE
AUTHOR SHALL BE LIABLE FOR DAMAGES ARISING HEREFROM. THE FACT THAT AN ORGANIZATION
OR WEBSITE IS REFERRED TO IN THIS WORK AS A CITATION AND/OR A POTENTIAL SOURCE OF
FURTHER INFORMATION DOES NOT MEAN THAT THE AUTHOR OR THE PUBLISHER ENDORSES THE
INFORMATION THE ORGANIZATION OR WEBSITE MAY PROVIDE OR RECOMMENDATIONS IT MAY
MAKE. FURTHER, READERS SHOULD BE AWARE THAT INTERNET WEBSITES LISTED IN THIS WORK
MAY HAVE CHANGED OR DISAPPEARED BETWEEN WHEN THIS WORK WAS WRITTEN AND WHEN
IT IS READ.
For general information on our other products and services, please contact our Customer Care
Department within the U.S. at 800-762-2974, outside the U.S. at 317-572-3993, or fax [phone].
For technical support, please visit www.wiley.com/techsupport.
Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may
not be available in electronic books.
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