Estates

March 5, 2026 Deadline to Reduce 2025 Estate & Trust Income Taxes

February 3, 2026 by Pamela Avraham

If you are the executor of an estate or the trustee of a trust, you should know that egregiously high income tax rates apply to estates and trusts at very low levels of income. In 2025, for estates and trusts, a 37% income tax rate as well as the 3.8% Net Investment Income (NII) tax kicks in at $15,650 of income. That’s not very high. For example, let’s say an estate has income of $215,650. The tax on the $200,000 (income in excess of the $15,650 threshold), at 40% equals a tax of $80,000. Ouch!

Suggestions?

There is hope! Estates and trusts only pay tax on what’s not distributed. Distributions lower the income tax for the trust and at the same time increase the recipient’s personal income tax. However, individuals do not pay the highest rates unless they are wealthy. In our example, if there are four beneficiaries and each receives $50,000 (one-fourth of the $200,000) many individuals will only pay 10% – 24% on that $50,000 instead of 40%. Potential tax saving could range from $32,000 to $60,000 depending on the individual tax bracket of each beneficiary.

What Can I Do Now?

It’s not too late. There’s a rule allowing distributions made in the first 65 days of the next year to be treated as if made in the preceding year. A special election must be made on the Fiduciary Income Tax Return. This year’s deadline is March 5, 2026.

Estates don’t need to have a calendar year end. For example, if a decedent died in June, the year end for the Estate can be May 31, in which case the 65-day rule would allow distributions until August 4^th. Executors should keep this in mind when planning distributions.

Are there Other Factors to Consider?

Yes. In addition to financial considerations, there are other factors to keep in mind. If a beneficiary is not financially knowledgeable and cannot manage money, or has a drug habit or is mentally unstable, you may not want to distribute the funds. Extra caution should be considered when making distributions to elderly beneficiaries who may be targets for financial abuse. These factors may outweigh the potential tax savings of larger distributions from a Trust or Estate.

Urbach & Avraham, CPAs LLP

CERTIFIED PUBLIC ACCOUNTANTS

1581 Route 27, Suite 201

Edison, NJ 08817

732-777-1158

www.ua-cpas.com

Please contact us for assistance with making distributions or any other tax related questions about managing a trust or estate.

In Charge of Mom’s Finances? Need an Accounting?

January 13, 2026 by Pamela Avraham

For several years you’re taking care of Mom, dashing her to many doctors and handling her finances. All this while juggling a full-time job. Suddenly your siblings ask, “What have you done with Mom’s money?” “Please account for Mom’s funds for the years you were in charge.”

As children you fought over the teddy bear. Now you’re fighting over a million dollars or more. Family members tend to accuse the financial in-charge of mismanagement, improper transactions and pocketing funds. The financial in-charge may be a guardian, trustee or executor with control over a trust or estate, or a Power of Attorney in charge of the assets of an aging person.

Family monetary disputes can escalate quickly. Providing an accounting to interested parties can prevent explosive family battles and avoid costly litigation. Many executors and trustees prepare a formal accounting to document how they have managed the assets. Beneficiaries are then required to approve the accounting before distribution of the funds.

An accounting? No problem! After all, you kept all the bank statements and receipts for every expense. However, unfortunately, a formal accounting must be in a specific format strictly mandated by NJ Court Rules. The following do not constitute a formal accounting:

A stack of all the bank and brokerage statements
Boxes, envelopes and binders of all receipts for all expenses paid
The check register for the estate checking account
The fiduciary income tax returns for the trust or estate (Form 1041) or the individual income tax returns (Form 1040)
An Excel summary of all expenses paid
A profit and loss summary from Quickbooks
Mom’s medical records

We can relieve your burden, take your crates of documents and convert them into a formal accounting. We can prepare a proper accounting for your relatives and the Court, if required. We have special Trust and Estate Administration software dedicated to professional Court Accountings and supporting schedules in accordance with Rules of Court for all fifty states with a strong specialty in NJ and NY Court Accountings. If there is a dispute about a specific asset or disbursement, we will add additional documentation to clarify, strengthen and justify your position.

Are you mom’s Financial Guardian?

NJ Guardianship Accounting Requirements. In all States, the Guardian must file an annual report of the financial affairs of the incapacitated person. In NJ, many counties now require that the Guardian of the Estate report using Judiciary forms as to the financial affairs. There are two different periodic reporting forms: the Periodic EZ Accounting form and the Periodic Comprehensive Accounting form. The Comprehensive Form requires numerous attachments to substantiate the figures reported. The Judgement of Incapacity should specify which form you are required to file, as well as the deadline for filing.

Instead of filing a Judiciary form, it is possible that a Judgement may direct periodic filing of a formal court accounting. All of these types of accountings are complex. Urbach & Avraham can relieve you of this burden and prepare these accountings for you.

Receiving commissions as an executor, trustee or guardian? These commissions are based on the corpus and income determined by a court accounting. Income commissions are based on accounting income per Rules of Court and not on taxable income. Fiduciaries who base their income commissions on taxable income may find themselves having to return substantial amounts.

Please contact us to see how our CPA firm can assist you.

March 5, 2024 Deadline to Reduce 2023 Estate & Trust Income Taxes

February 5, 2024 by Pamela Avraham

If you are the executor of an estate or the trustee of a trust, you should know that egregiously high income tax rates apply to estates and trusts at very low levels of income. In 2023, for estates and trusts, a 37% income tax rate as well as the 3.8% Net Investment Income (NII) tax kicks in at $14,451 of income. That’s not very high. For example, let’s say an estate has income of $214,451. The tax on the $200,000 (income in excess of the $14,451 threshold), at 40% equals a tax of $80,000. Ouch!

Suggestions?

There is hope! Estates and trusts only pays tax on what’s not distributed. Distributions lower the income tax for the trust and at the same time increase the recipient’s personal income tax. However, individuals do not pay the highest rates unless they are wealthy. In our example, if there are four beneficiaries and each receives $50,000 (one-fourth of the $200,000) many individuals will only pay 10% – 24% on that $50,000 instead of 40%. Potential tax saving could range from $32,000 to $60,000 depending on the individual tax bracket of each beneficiary.

What Can I Do Now?

Are there Other Factors to Consider?

Yes. In addition to financial considerations, there are other factors to keep in mind. If a beneficiary is not financially knowledgeable and cannot manage money, or has a drug habit or is mentally unstable, you may not want to distribute the funds. These factors may outweigh the potential tax savings of larger distributions from a Trust or Estate.

Please contact us for assistance with making distributions or any other tax related questions about managing a trust or estate.

March 5, 2023 Deadline to Reduce 2022 Estate & Trust Income Taxes

January 16, 2023 by Pamela Avraham

If you are the executor of an estate or the trustee of a trust, you should know that egregious high income tax rates apply to estates and trusts at very low levels of income. In 2022, for estates and trusts, a 37% income tax rate as well as the 3.8% Net Investment Income (NII) tax kicks in at $13,451 of income. That’s not very high. For example, let’s say an estate has income of $213,451. The tax on the $200,000 (income in excess of the $13,451 threshold), at 40% equals a tax of $80,000. Ouch!

Suggestions?

What Can I Do Now?

Are there Other Factors to Consider?

Yes. Frequently, the main purpose for a trust is not to save taxes, but rather control. If a beneficiary can’t manage money, is a spendthrift, gambler, drug addict or is mentally unstable, you may not want to distribute the funds. These factors may outweigh the tax savings of distributions from a Trust or Estate.

Please contact us for assistance with making distributions or any other tax related questions about managing a trust or estate.

Fiduciary Accountings 101

November 21, 2022 by Pamela Avraham

Does your parent need a Guardian?

If Dad becomes mentally incapacitated to the point where he should not be handling his own financial affairs, he may need a Guardian. We work with many attorneys who specialize in Guardianships. They can apply to the Court to have a Financial Guardian appointed and a Personal Guardian also if necessary.

Guardian vs. Power of Attorney- What’s the Difference?
A Financial Guardian has a myriad of responsibilities to handle. In contrast to a Power of Attorney who has the right to handle many of these functions, the Guardian is Court-appointed and has the obligation to perform all these jobs.
Accounting Obligations of Guardian:

Locating assets of ward
Handling all tax matters
Preparing court accountings
Establishing budget for the ward’s personal and health needs
Investing liquid assets
Review and update of all insurance policies
Review of terms of any traditional or reverse mortgages
Maintaining real estate of ward

NJ Guardian Accounting Requirements
In all States, the Guardian must file an annual report of the financial affairs of the incapacitated person. In NJ, many counties now require that the Guardian of the Estate report using Judiciary forms as to the financial affairs. There are two different periodic reporting forms: the Periodic EZ Accounting form and the Periodic Comprehensive Accounting form. The Comprehensive Form requires numerous attachments to substantiate the figures reported. The Judgement of Incapacity should specify which form you are required to file, as well as the deadline for filing.
Instead of filing a Judiciary form, it is possible that a Judgement may direct periodic filing of a formal court accounting. All of these types of accountings are complex. Urbach & Avraham can relieve you of this burden and prepare the accountings for you.

Do Executors and Trustees also need Accountings?

Estates and trusts need court accountings in two instances. If a beneficiary requests an accounting, usually in a litigated matter, the Court will demand a formal accounting. If any of the beneficiaries is a charitable organization, than a formal accounting must be submitted to the state Attorney General.

An accounting? No problem! After all, you kept all the bank statements and receipts for every expense. However, unfortunately, a formal accounting must be in a specific format strictly mandated by NJ Statutes in the Uniform Principal and Income Act. The following do not constitute a formal accounting:

• A stack of all the bank and brokerage statements
• Boxes, envelopes and binders of all receipts for all expenses paid
• The check register for the estate checking account
• The fiduciary income tax returns for the trust or estate (Form 1041) or the individual income tax returns (Form 1040)
• An Excel summary of all expenses paid
• A profit and loss summary from Quickbooks
• Mom’s medical records

Preparing a formal account can be an overwhelming process for a fiduciary. The starting point is a list of all assets for the first day of the account period. All receipts, disbursements, gains and losses from disposition of assets, transfers and distributions are detailed.
We can relieve your burden, take your crates of documents and convert them into a formal accounting. If there is a dispute about a specific asset or disbursement, we will add additional documentation to clarify, strengthen and justify our client’s position.

Working with Urbach & Avraham, CPAs is unique because we truly know what you’re going through. Several members of our firm have taken care of their elderly parents. We have experienced the many trials and tribulations of providing for their medical needs and handling their financial affairs. Please contact us to see how our CPA firm can assist you.

Preserve Family Wealth with Portability

November 21, 2022 by Pamela Avraham

Extension of Time to Elect Portability of the DSUE

and Preserve Family Wealth

In 2011, the IRS introduced the concept of portability of the estate tax exemption from a deceased spouse to a surviving spouse. Currently, with the federal estate tax exemption at $12 million, a married couple can transfer up to $24 million to heirs without a federal estate tax. One of the tools enabling this large tax-free transfer is electing the DSUE, the “Deceased Spouse Unused Exclusion.”

What is Portability and How to Obtain it?

Portability occurs when a surviving spouse files a US Form 706, Gross Estate Tax Return, for the sole purpose of calculating and capturing any unused estate tax exemption from the estate of the first spouse. Completing a Form 706 to make the DSUE election is no easy task.

Why should one elect Portability/DSUE?

If the surviving spouse has an estate worth much lower than the current $12 million estate exemption, why file for the DSUE?

Congress may reduce the estate tax exemption to 5 or 3.5 million
The estate of the surviving spouse may appreciate substantially if there are businesses and/or real estate
A young healthy spouse has many years to accumulate more wealth and have a potential taxable estate
The surviving spouse may inherit from other relatives

When must one file to elect Portability/DSUE?

Good news! This year the IRS extended the time to file for the DSUE election to on or before the fifth anniversary of the decedent’s death.

Conclusion

With the current federal tax exemption so high, spouses should take advantage and claim any unused estate tax exemption after the death of the first spouse. Given the factors mentioned above, even smaller estates should consider filing for portability.