Page 60 - Successor Trustee Handbook

There are several other key income tax-related issues that you will want to
review with your accountant. Keep in mind that this is not an exhaustive list.

Determination of the taxable year of the Trust, whether a calendar year or a
fiscal year ending on the last day of a month other than December.

The effect and desirability of withdrawals from retirement plans, IRAs and
annuities. These withdrawals will likely represent taxable income, whereas if
the monies can be kept in these accounts, they may continue to be able to
compound on a tax-deferred basis until withdrawals are later desirable or
mandated.

Payment of quarterly estimated income taxes. Waiting to pay taxes until the
filing date for the return may subject you to penalties and interest.

The income tax-capital gains tax effect of sales of Trust assets. Again, we
cannot let the income “tax tail wag the dog” and there may be very sound,
practical reasons why sales need to take place regardless of the income tax
consequences (See the Chapter, “Investing Trust Assets”).

Finally, keep in mind that income tax planning is closely interrelated to your
investment decisions, and the tax impact of an investment decision should be
discussed with your financial advisor and, as necessary, your accountant as
well. For example, decisions related to withdrawals of retirement plans, IRAs
and annuities, the making of sales, and selection of investments (whether
taxable, tax-free, tax-deferred, and tax-sheltered) all have potential income
tax consequences that must be considered prior to taking action.

While all this may sound a little “mind-boggling”, remember that a good CPA can
help make all these matters easy for you and his or her reasonable fees may be
paid from the Trust!

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