a.      Decedent’s final Federal 1040

b.      Decedent’s final State 1040

c.      Federal 1041 for the estate

d.      State 1041 for the estate

e.      K-1 to beneficiaries

f.        Form SS-4 to obtain an Estate Taxpayer’s Identification Number

g.      Form 2848 – if necessary to appoint someone has power of attorney to deal with the I.R.S.

h.      New Jersey Inheritance Tax. (NJIT) in appropriate situations

i.        New Jersey Estate Tax (NJET)

What are the deadlines for filing the various tax returns?

1. The deadline for filing the decedent’s final federal and state 1040 is April 15 following the year of death.

2. The deadline for filing the federal and state 1041 for calendar year estates is on or before April 15th.  For fiscal year estates, it is the 15^th day of the fourth month following close of the tax year.

3. The deadline for filing the Federal Estate Tax Return Form 706 is nine (9) months after the decedent’s date of death.

4. The deadline for filing the decedent’s Federal Gift Tax Return Form 709 is April 15 following the calendar year in which the gift was made.

5. The deadline for filing the New Jersey Inheritance Tax Return (NJIT) is eight (8) months from the decedent’s date of death

6. The deadline for filing the New Jersey Estate Tax Return (NJEST) is nine (9) months from the decedent’s date of death.

What personal liability do I have as Executor of an estate?

As the Executor of an estate, you have personal liability to all taxing authorities for any taxes that are due including interest and penalties for late payments.  In addition the Executor has personal liability to all beneficiaries of the estate for performance of the Executor’s duties under the Will. These include compliance with the Uniform Principal and Income Act and the Prudent Investor Act.

Is a bond required of an Executor?

A bond is required of an Executor unless it is waived by the Will, which is commonplace.  In cases where there is no Will, an Administrator of the estate is always required to post a bond.

What is necessary to probate a Will?

To probate a Will, the Executor takes it to the Surrogate’s office in the county in which the decedent died.  If the Will is self proving which means it has two witnesses and a notary, then no witnesses are required.  The Executor presents the Surrogate with a death certificate.  A check must be paid at the time of probate.  The check is normally between $50 and $100 depending on the length of the Will and the number of short certificates required.

What must a Trustee do to comply with the Prudent Investor Act?

Under the terms of the Prudent Investor Act, trust assets must be invested not only for safety but also for growth.  This requires a sophisticated investor.  Under the provisions of the Prudent Investor Act, this is a function that the Trustee may delegate to a third party.  The Trustee has a duty to do due diligence to investigate the ability of the third party to whom the investment function is delegated.  This relieves the Trustee of any duty with respect to investments.  Failure to comply with the Prudent Investor Act may result in personal liability on the part of the Trustee.

How does the Trustee comply with the terms of the Principal and Income Act?

The Principal and Income Act is a very detailed law which specifies what items are allocated to income and what items are allocated to principal.  Since most trust documents provide for distribution of income to one beneficiary and principal to others, this is critical in the administration of a trust.  This is a function, which the Trustee may wish to delegate to a third party.  By obtaining professional assistance, the Trustee may limit himself or herself from personal liability.

What tax returns must the trustee consider?

A Trustee is responsible to prepare and file federal and state income tax returns for each year of the trust.  For calendar year trusts, the 1041 must be filed on or before April 15^th following the end of each calendar year.  For fiscal year trusts, the 1041 must be filed by the 15^th day of the fourth month following the close of the tax year.  In addition, the Trustee is responsible for forwarding to beneficiaries a K-1 with respect to any distributions made to the beneficiaries.  Preparation of tax returns is another function for which the Trustee may wish to retain professional assistance.

What is the personal liability of a trustee?

Like an Executor, the Trustee is responsible to the taxing authorities for the prompt payment of all taxes when due and for any interest penalties or late charges if the taxes are not promptly paid.  The Trustee has an enormous potential liability to all beneficiaries of the trust.  The trust must be administered in accordance with its terms and the beneficiaries are entitled to receive all benefits under the document. The Trustee is held to a very high standard of care. The Trustee must never self-deal.  The Trustee must comply with the terms of the Prudent Investor Act and the Principal and Income Act.  As our society becomes more and more litigious, there are more suits filed against Trustees for improper trust administration. 

What are the advantages of a Trustee obtaining the assistance of a law firm?

A law firm can guide the Trustee with respect to compliance with the terms of the Prudent Investor Act and with respect to the Principal and Income Act.  If desired the law firm can prepare and file all the tax returns to insure that the taxes are paid when due.  The law firm can pay all of the trust bills and render the accountings to beneficiaries on a period basis.  Finally, the law firm can insure that there is no personal liability on the part of the Trustee for improper trust administration.