Hellmuth & Johnson attorney, Scott Nelson, will be presenting on a panel for a webinar discussing “Mastering Fiduciary Accounting Income for Estate Planners and Administrators.” Scott’s presentation will be from 12:00-1:30pm (Central).
For more information on the program please check out the information below.
A critical and often overlooked task for estate planners, administrators and trustees is navigating the rules governing FAI. FAI is the amount generally available to distribute to income beneficiaries of a trust or estate. It is different from both taxable income and distributable net income, both of which are tax-related concepts. It is crucial for estate planners and administrators to have a thorough understanding of FAI principles to properly allocate income and expenses and equitably distribute assets.
The starting point for determining FAI is the operating instrument, such as a will or trust agreement. Where the operating document is unclear as to an income receipt, an expense item or a distribution item, the FAI determination defaults to the state law where the situs of the trust is located. Most states have incorporated the UPIA, with some local differences. However, the timing and amount of distributions to beneficiaries is determined by fiduciary accounting principles.
Another key skill is reconciling FAI to both distributable net income and trust taxable income. In instances where trust documents do not adequately address distributable net income inclusion of capital gains, fiduciaries can be faced with significant tax challenges that can complicate distribution and allocation decisions. Accountants and lawyers representing fiduciaries need to be able to identify the critical differences between fiduciary accounting and tax accounting to avoid both tax consequences and beneficiary challenges.
Listen as our experienced panel provides a deep and practical guide to what estate planners must know to master FAI beyond the basics.
- Specific challenges in allocating income and expenses to FAI
- UPIA factors in calculating FAI
- Impact of FAI on trust distributions
- Tax considerations such as distributable net income inclusion on distribution strategies
- Planning considerations and traps to avoid
The panel will review these and other key issues:
- How operating documents impact FAI calculations
- Interpreting state laws and UPIA provisions in circumstances where operating documents are silent or inconclusive
- Reconciling FAI to distributable net income and to trust taxable income
- How FAI determines distribution amounts and timing
After completing this course, you will be able to:
- Recognize the factors that go into the calculation of FAI
- Integrate knowledge of trust operating documents to determine income and expense items, as well as amounts and timing of distributions to beneficiaries
- Apply state law and UPIA provisions to income and expense items where the operating documents are silent or unclear
- Tackle the mechanics of reconciling FAI to both distributable net income and trust taxable income
- Identify trust terms and income items that create issues in designing an equitable distribution strategy
Scott Nelson, CPA – Hellmuth & Johnson, Minneapolis, Minnesota
Mr. Nelson draws on more than 27 years of experience in trust and estates. He also has a background in business law and is a tax attorney whose ongoing involvement in the drafting of legislation relative to estate planning keeps him on the cutting edge of his field. His clients range from individuals to family-owned businesses.
Gregory V. Gadarian, Partner – Gadarian & Cacy, Tucson, Arizona
Mr. Gadarian’s practice focuses on tax strategy, estate planning and asset protection law. Previously, he was a Legislation Attorney on the staff of the Joint Committee on Taxation, U.S. Congress. Before that, he was an Attorney-Advisor to Judge Cynthia H. Hall of the U.S. Tax Court. He is the former Arizona State Chair of the American College of Trust and Estate Council, and is an Adjunct Professor at the University of Arizona College of Law.
This CLE/CPE webinar will provide estate planners with a comprehensive and practical guide to navigating the complexities of fiduciary accounting income (FAI) for trusts and estates.