What to Expect: Tax Season and Your Trust

Mar 20, 2019 | Understanding Trust Administration

It’s that time of the year again–tax season! Whether you dread or enjoy doing your taxes each year, they are inevitable. The same goes for trust tax returns since each trust must file a tax return of its own each year.

Here are some helpful reminders regarding the trust tax process.

Cumberland Trust’s platform allows families to choose their own trusted financial advisor to handle the investment management of trust assets. Because of the 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 will then go 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). The K-1 form is needed for a beneficiary’s personal tax return to be filed.

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 15th. 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 trust administrator should you have any questions specific to your trust.