Specialized accounting and tax services tailored for fiduciary duties and elder care financial management.
“We have duties to others, and duties to ourselves, and we cannot shirk either.”
At Somerset Tax Partners, LLC, we offer specialized fiduciary and elder care accounting services designed to meet the unique needs of our clients. Our comprehensive services ensure meticulous financial management and compliance, providing peace of mind for fiduciaries and families managing elder care. With our expert guidance, you can navigate complex financial responsibilities with confidence, knowing that all aspects of accounting, reporting, and compliance are handled with the utmost care and professionalism.
Through 20 years of experience preparing fiduciary accountings, we provide support to attorneys and fiduciaries in preparing accountings for trusts, estates, and guardianships. Each engagement is tailored to meet the needs of the fiduciary or attorney. Accountings are generally required by law periodically. The vast majority of past fiduciary accounting experience involves mult-million dollar estates and trusts.
Trust accountings in particular are unique to any other type of accounting because each item must be allocated to income or principal. Guardianship accountings are generally required by the courts to be submitted periodically. Estate accountings may be waived but are generally required to conclude probate administration.
We prepare tax returns for fiduciaries of estates and trusts. Our office often obtains the Employer Identification Number when we are contacted about a new trust or estate. The tax law for trusts and estates is significantly more complex than individual tax law. As such, the tax returns often require more skill, experience and knowledge to prepare. Our experience is drawn from 15 years as a senior paralegal under tax attorneys specializing in trusts and estates.
A tax item unique to estates and trusts is the step-up in basis. For the first tax return, we will assist you in documenting the date of death fair market value of assets owned by the decedent. A step-up in basis means that the date of death value becomes the basis of assets in the hands of the fiduciary and the next generation of heirs. Thus, it is critically important to correctly obtain valuations of assets upon an individual’s death. The step-up in basis can shelter a significant amount of capital gain and legitimately avoid taxation.
Although the concept of elder care accounting is relatively new, the principle is similar to the longstanding fiduciary duty. As a loved one ages and is less able to manage personal finances, a child or other trust individual is often tasked with assisting to pay bills, make deposits, prepare tax returns, and invest assets.
Acting under a power of attorney, the trusted individual is known as an agent, and the agent only has fiduciary duties to the principal or the signer of the power of attorney. There is no responsibility or obligation to account to anyone else, including family members. This does open the door for the mismanagement of funds, particularly if the principal is unable to understand or consent to transactions.
Such a scenario breeds a great deal of mistrust among families, along with the possibility of disagreements and even bitterness. Most of us probably know of an instance in which accusations of financial mismanagement or misappropriation were made in similar circumstances.
The elder care accounting provides third-party review and oversight of the agent’s handling of finances and enables for transparency among family members. Although disclosure to family members may not be required by the law, the transparency offered by elder care accounting greatly reduces mistrust and friction among families.
Elder care accounting also assists agents who may be unfamiliar with certain types of accounts or wish to delegate accounting.
Aging parents may want to consider implementing an agreement among family members which compels the agent to be transparent with personal finances, so that future friction and disagreements can be minimized. Without an advance discussion, there is no obligation or responsibility by the agent to disclose financial information to family members. Similarly, the agent should want to be transparent, particularly if the principal is incapacitated or suffers from reduced cognitive ability, so that family members are in the loop and do not make false accusations or raise suspicion.
We believe the greatest value of elder care accounting is promoting family harmony by eliminating friction surrounding a loved one’s personal finances.
A: The fiduciary duty can simply be defined as acting in the best interest of another person and acting as a prudent person in the shoes of another. Fiduciaries include trustees, executors, agents under powers of attorney, and any other type of relationship in which trust and care over an individual’s assets is given to another. Fiduciaries can have responsibilities to the individual, family members, and the courts. Any breach of fiduciary duties may bring the potential for legal damages.
A: Fiduciary accountings are required under state law to be provided periodically. Fiduciary accountings involve more than just listing transactions in a report. Each transaction is identified as income, expense, or capital, and further divided between income and principal. Income represents current beneficiaries who are to receive periodic distributions of the income. Principal represents the beneficiaries who are to receive the remaining assets. Certain accountings may be waived, however, waivers are traditionally only given when there is full knowledge and understanding of the financial transactions. Guardianship accountings traditionally cannot be waived but are instead a requirement imposed by the courts.
A: Resolving conflicts of interest held by a fiduciary is generally a legal matter which requires the involvement of a knowledgeable attorney to address. Any conflict of interest held by a fiduciary may need to be disclosed, and in some instances, a neutral person may need to be appointed to negotiate the interests of the principal. If we become aware of a conflict of interest held by our client who is a fiduciary, we will defer to your attorney for any disclosure of the transaction on the accounting.
A: We are often engaged either by the fiduciary or by the attorney representing the fiduciary. Attorneys often prefer to retain our services because our services may, by direct engagement, be subject to the attorney-client privilege. However, where no attorney is involved, our direct client is the fiduciary.