Wednesday, 17 March 2021 08:12

Navigating Tax Season: Trust Tax Reminders

Each year, tax returns must be prepared and filed for personal trusts and estates.

Below are some reminders regarding the trust tax filing process.

Cumberland Trust’s platform allows clients to choose their own trusted financial advisor to handle the investment management of trust assets. Because of this separation of duties, the financial advisor and Cumberland Trust work together with the trust’s accountant during tax season.

Typically, in late February through late March, Cumberland Trust will receive 1099 forms from a trust’s financial advisor for any applicable brokerage accounts. These documents are then sent to the trust’s accountant to prepare the trust’s tax return. Once the trust’s tax return has been prepared and filed, a Schedule K-1 form is generated for any trust beneficiary(ies). For a beneficiary’s personal tax return to be correctly prepared and filed, this K-1 form is needed.

Often, due to delays in receiving 1099 forms or special asset tax documents (e.g., related to publicly traded limited partnerships), beneficiaries’ K-1 forms are not ready until late March, early April or even after April 15. Any delays in the trust’s tax preparation could mean that a beneficiary’s personal taxes must go on extension.

During tax season, the trust team, made up of Cumberland Trust, the financial advisor, and the trust accountant, work closely together to complete this process as smoothly and efficiently as possible. Cumberland Trust’s administration team remains committed to regular communication with clients regarding the status of trust tax returns and K-1 forms. Please contact your relationship manager should you have any questions specific to your trust.

As of this writing, the federal individual income tax filing deadline has been extended to May 17, 2021. Note, this does not apply to first-quarter individual estimated tax payments. Please consult your personal accountant regarding your individual tax returns and your state deadlines.

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