Tucson Tax Team LLC + 6111 East Grant Road + Tucson, AZ 85712 + (520) 777-7844
Our responsibilities: Our responsibility is to accurately prepare your Federal and State Estate or Trust
Income tax returns. We will complete these returns using the information you provide to us. Although
we may ask for explanation regarding certain items, we will not be auditing or verifying any
information. If we encounter a situation in which the tax laws are unclear, we will advise you of it and
use our professional judgment as to the correct handing of the situation.
Your responsibilities: Your responsibility is to provide us with all the information needed to prepare
the return. As Trustee or Fiduciary you are required to keep receipts and other documents that
substantiate the amounts that you are claiming on this return. These may be necessary to prove the
accuracy of the information on your return to a taxing authority. We recommend you keep tax receipts
for a minimum of 4 years.
You are ultimately responsible for what is claimed on the fiduciary tax return, so you should review
the return carefully before signing it. We will be happy to give you any explanation you need. If you
receive a notice from a taxing authority claiming that the Estate/Trust owes additional taxes, please
contact our office before you reply or make any payments. These notices are often incorrect. Because
there are strict time frames in which to respond, please contact our office as soon as you receive any
such notice. See General Fiduciary Responsibilities (below) for more information.
Confidentiality: Information you provide will be kept confidential, but it is not protected from the IRS
or the state. We cannot disregard the implications of any information you provide in the process of
preparing the return.
Fees and deadlines: Our fees are based upon our fee schedule and complexity of the tax return.
Providing us with complete and organized information is the best way to reduce your tax preparation
costs. Unless other arrangements have been made in advance, we require full payment of your
preparation fees before we file your returns.
Your returns are subject to review by taxing authorities. Should an examination occur, we will be
available to represent you at an additional fee. If any interest or penalties are assessed, they will be
your responsibility.
We cannot guaranty the completion of your tax return unless all information is received within ten
days of the filing deadline. If all information is not received by that time we reserve the right to file an
extension on your behalf.
Estate / Trust Engagement Letter
Thank you for using Tucson Tax Team for your tax preparation needs. Clear
communication is key to a successful business relationship. The purpose of this
letter is to make sure we both have the same understanding of the services we
are providing.
Tucson Tax Team LLC + 6111 East Grant Road + Tucson, AZ 85712 + (520) 777-7844
General Fiduciary Responsibilities
Fiscal Responsibility As a trustee, you stand in a “fiduciary” role with respect to the beneficiaries of
the trust, both the current beneficiaries and any “remaindermen” named to receive trust assets upon
the death of those entitled to income or principal now. As a fiduciary, you will be held to a very high
standard, meaning that you must pay even more attention to the trust investments and disbursements
than you would for your own accounts. You will need a Certificate of Trust or a letter of appointment
showing you are the Trustee or Executor of the Trust/Estate.
The Trust Terms Read the Trust itself carefully, both now and when any questions arise. The Trust is
your road map and you must follow its directions, whether about when or how to distribute income
and principal or what reports you need to make to beneficiaries.
Accounting One of your jobs as Trustee is to keep track of all income to, distributions from, and
expenditures by the Trust. Generally, you must give an account of this information to the beneficiaries
on an annual basis, though you need to check the terms of the Trust to be sure. In any case you must
use reasonable care in your bookkeeping so proper and correct tax returns can be filed annually.
Fees Trustees are entitled to reasonable fees for their services. Often the Trust terms will spell out the
amount of Trustee fees. Otherwise the fees must be reasonable based on the amount of work needed to
properly maintain the Trust. The Trust must file form 1099M for any Trustee that earns over $600.00
during the calendar year. The Trustee must report this income on their personal tax return in the year
Disbursements Depending on the Trust documents none, some, or all of the Trust income must be
distributed on an annual basis to the beneficiaries. It is your responsibility to know what income must
be distributed and to make sure it is timely completed. Income not distributed is taxed at the Trust’s
tax level and is usually a higher tax rate than if the money is distributed and reported on the
beneficiaries’ personal tax return. A form W-9 should be obtained from each beneficiary before the first
distribution is made.
Taxes A tax return must be filed by an Estate or Trust if gross income is over $600.00 during the year.
If money is distributed to beneficiaries, they will receive a Sch K-1 that shows income/expenses during
the year for their personal tax return.
An Estate tax return is due if an individual’s estate is greater than $11,200,200 for 2018.
Capital Losses Capital losses may not be used by the Estate/Trust until the final year. The unused
capital losses can be “distributed” to beneficiaries in the final year to be used on their personal tax
Form 56 You should file form 56 to notify the IRS of your fiduciary relationship. Tucson Tax Team can
prepare this form for you.
Tucson Tax Team LLC + 6111 East Grant Road + Tucson, AZ 85712 + (520) 777-7844
Section 644 Election As Trustee, you may make an election by the due date of the initial return to treat
a living Trust as an Estate. Estates must be closed within 2 years of date of death. An Estate may use
either a calendar year or fiscal year tax return which can result in overall tax savings.
Accounting Period If you have an Estate, you can elect in the initial year to either have a calendar or
fiscal year accounting period. Example: Taxpayer dies on 7/4/2017. The Trustee may elect to choose a
calendar year: 7/4/2017 to 12/31/2017. 1/1/2018 – 12/31/2018 or they may choose a fiscal year: 7/4/2017
to 6/30/2018, 7/1/2019- 6/30/2019.
Timing Proper timing of income, expenses, disbursements and even accounting periods can save the
Trust and its beneficiaries tax dollars. For small estates that can be closed within 12 months, filing a
fiscal year return allows the Estate to file only one tax return. Depending on when income is received,
paying Estate or Trust expenses can reduce the taxable income to either the Trust or Beneficiaries.
Tucson Tax Team, LLC can help you make decisions regarding Elections and Timing.
Closing Estate Before an Estate may be closed all legal requirements must be met and all assets (see
note below) must be distributed to beneficiaries. Before the final distribution of estate assets, an
accounting of the Estate should be sent to the beneficiaries for their signature and approval. Your Trust
documents will tell you if this accounting needs to be a formal accounting or can be informal.
Note: A slush fund in a non-income bearing account should be kept to pay final expenses (tax return
fees, taxes, etc.) and held until the statute of limitations on any tax returns (usually 3 years) is met. The
remaining slush fund money is then distributed to beneficiaries. The amount of funds held in a slush
fund is determined by the size of the estate and expected expenses and liabilities.
this letter is in agreement with your understanding of this engagement, please sign below.
_____________________________________ _________
Signature D
Print Name of
Print Name of Trust / Estate