Trust Accounting

Trust Accounting

Trust Accounting is very detailed.

and when a CPA charges you for it, can become very costly.

I will say if the trust holds stock and the death occurs over the weekend, the calculation is complicated…

It will be the average of 4 numbers; the opening and closing price of Friday and Monday averaged.  It gets detailed.

Legal compliance of trust accounting needs to be obeyed.

First things first, I will need to read the Trust document itself.  There will be rules, regulations, clauses, and legal compliance that will dictate the percentages or divisions necessary to deliver accurate and compliant trust accounting.

Details matter.

Trust accounting is necessary to accomplish basis as well as dividing up the assets to the beneficiaries.

  • Get the house appraised within 90 days of the death of the owner.
  • Get all assets appraised within 90 days of the death of the owner.

💜 What is basis?

Basis is what accountants use as a starting point for your tax liability.

💜 What is taxed?

Well, it gets even more complicated.

The capital gains tax, if any, would be now due upon selling.

There is no inheritance tax on a trust.
The gain on the asset would be taxed at your income rate.

💜 The difference of a will and a trust

(to an accountant):

A will means your taxes are due the date of death, but you don’t get the money for a year – oh, court fees and attorney fees are approximately 10% of the gross value of the probate assets.

A trust means your taxes are due the day/year you sell the asset, and the lawyer has already been paid.

💜 There are several different kinds of trusts.

The Living Trust is the most common lately as it can be changed while the creators are still alive.

Testamentary Trusts – those created by will upon one’s death.

Irrevocable Trusts – those made irrevocable during life or that become irrevocable upon one’s death. These types of trusts are irrevocable, meaning they cannot be changed.

Special Needs Trust are extremely helpful to those with special needs.

A Special Needs Trust can only be set up for someone defined by the government, specifically the Social Security Administration, as having a disability.  This definition is very strict and the process of becoming government defined as disabled is tedious.

What the special needs trust does, is allow the person with special needs to have government income, as well as a protected lump sum of money available for the disabled person’s needs.

We all know that government assistance is not enough, and the limitations of what you can earn or have and still keep assistance, are honestly below poverty in San Diego.

The Special Needs Trust allows the person with special needs to keep their government assistance and their inheritance or gift or law suit winnings or whatever assets are in the trust.

Typically, there is a bank account in the Special Needs Trust name.  A bank card would be in the possession of the trustee.  This bank card can be used to make purchases for what the trust dictates.

Many trusts will limit or dictate what can or cannot be purchased.

The most common limitation is to not buy: “calls” and “puts” from the stock market.  Calls and Puts are the very dangerous investments.  Many trusts have stock in them.

* The common misunderstandings of a trust is to create the trust but not put the assets in the trust. Then say, in order to avoid this misunderstanding, you must do the following…*

Once the trust is created, the individual or family will need to put the assets into the trust.

💜 all bank accounts with significant funds should be transferred into the trust’s name.

💜 You must transfer the deed to the house into the trusts name.

💜 You must transfer the stocks into the trusts name.



Tax Records