Chap019 - Chapter 19 Accounting for Estates and Trusts...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 19 - Accounting for Estates and Trusts CHAPTER 19 ACCOUNTING FOR ESTATES AND TRUSTS Chapter Outline I. Estate accounting encompasses the recording and reporting of events that occur from the time of a person's death until distribution of all property. A. An individual who dies "testate" had prepared a valid will whereas one who dies "intestate" expires without a valid will. 1. State probate laws govern wills and estates. These statutes facilitate three (3) goals. a. To gather and preserve the decedent’s property. b. To ascertain the decedent's intent for her property. c. To settle debts and distribute the remaining assets consistent with the decedent’s intentions. 2. Where no will exists, the laws of descent (for real property) and the laws of distribution (for personal property) govern the distribution of the decedent’s property. B. A will should name an executor of the estate to oversee the management and conveyance of property. If an executor is not named or is not able to serve, the probate court will appoint an administrator. C. Claims against the estate must be paid in a specific order of priority. 1. Expenses of administering the estate – which include legal costs, executor fees and similar items. 2. Funeral expenses and medical expenses of last illness. 3. Debts and taxes given legal preference. 4. All other claims. D. Estate distributions. 1. Devise—a testamentary gift of real property. 19-1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Chapter 19 - Accounting for Estates and Trusts 2. Specific legacy (or bequest)—an item of personal property that is identified directly by the testatator in his will. 3. Demonstrative legacy—a cash gift made from a particular identified source. 4. General legacy—a cash gift made with no source designated. 5. Residual legacy—a gift of any remaining estate property. 6. If sufficient property is not available to satisfy all legacies, the process of abatement is used to reduce the various gifts. E. Estate and inheritance taxes. 1. Federal estate tax—an excise tax on the right to convey property. a. The fair market value of estate property is taxed after reduction for funeral expenses, estate administration expenses, liabilities, charitable bequests, and the value of all property conveyed to spouse. b. Until 2009, the value of the estate is reduced by an exemption that gradually increases over the years. In 2010, the federal estate tax is repealed. However, a new law must be passed by Congress for the repeal of the tax to last beyond that one year. c. The federal gift tax will not be eliminated completely, but an individual is allowed an annual exclusion of $13,000 (indexed for inflation) plus a $1 million lifetime exclusion. 2. State inheritance tax—assessed on the right to receive property. This tax varies significantly from state to state.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 34

Chap019 - Chapter 19 Accounting for Estates and Trusts...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online