Understanding Trust Compliance Issues

CPAs are often asked to act as trustees or are retained to prepare fiduciary income tax returns for trusts.  A CPA who is involved in trust issues must become aware of the fiduciary trust accounting rules that apply to a trust. 

In the book entitled, Trust Your Trust, Seymour Goldberg discusses the CPA’s need to know the specific state trust accounting rules if he or she is involved in trust issues.  Provided below is an excerpt from the book concerning the trustee and state trust laws:

Over the last decade or more, most states plus the District of Columbia have adopted versions of the 1997 Uniform Principal and Income Act. The UPAIA covers a number of subject areas including definitions and fiduciary duties, the decedent’s estate or terminating income interest, the apportionment of the beginning and end of income interest, the allocation of receipts during the administration of a trust, and the allocation of disbursements during the administration of a trust.

These revised laws triggered in part the need for the American Institute of CPAs to issue a comprehensive Practice Guide for Fiduciary (Trust) Accounting in December 2007 for accountants who perform fiduciary accounting services.

This practice guide (including the appendix) is over 250 pages long. The purpose is to provide information on what issues the CPA should know about when preparing fiduciary accountings and fiduciary income tax returns.

A dedicated number of members of the AICPA spent several years developing the trust accounting practice guide. These AICPA members were members of the AICPA Trust Accounting Income (TAI) Task Force.

In 2008 amendments were adopted by the National Conference of Commissioners on Uniform State Laws to the 1997 version of the UPAIA. Each jurisdiction then decides whether or not to adopt the recommended changes in whole or in part. Most states have adopted the recommended changes, but a number of states did not. This makes life difficult since the professional advisor must constantly monitor the state trust accounting law in his or her jurisdiction to determine if any changes were made as well as the effective date of any changes.

See Seymour Goldberg, What Accountants Need To Know About Trust Compliance Issues, Accounting Today, Oct. 29, 2014. 

Special thanks to Seymour Goldberg (Goldberg & Goldberg, P.C.) for bringing this article to my attention.