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Fiduciary duty

Duties of executors, trustees, and other fiduciaries.

EST-02 · 01

Fiduciary Duties of Executors and Trustees: Loyalty, Records, and Distributions

8 MIN · EST

Fiduciary duties are enforced from documents, long after the decisions were made. This brief pairs each duty with the record a court will look for and the failure it exposes.

Fiduciary law is state law. Most states have adopted a version of the Uniform Trust Code, but the local statute and the instrument control.
Self-dealing is judged by the transaction's structure, not its outcome. A fair price does not cure a conflicted purchase in most states.
The duty to inform and report is what starts limitation periods running; a fiduciary who never reports keeps the exposure open.

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EST-03 · 02

Grantor Trusts: Who Pays the Income Tax, and Why Planners Want That Result

8 MIN · EST

Grantor trust status is a deliberate choice, not an accident. This brief explains which retained powers trigger it, what the tax payment does for the family, and how the structure unwinds.

A grantor trust is ignored for income tax while remaining a completed gift for transfer tax, which is the whole point of the structure.
The grantor pays tax on trust income from personal funds, and the IRS has ruled that payment is not an additional taxable gift to beneficiaries.
Sales and loans between a grantor and a grantor trust are disregarded, so no gain is recognized when assets are swapped or sold for a note.

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EST-06 · 03

Changing an Irrevocable Trust: Decanting, Reformation, and Beneficiary Consent

7 MIN · EST

Irrevocable does not mean unchangeable. This brief sets out the six routes state law provides for altering a trust, what each one requires, and where the federal tax overlay bites.

Decanting authority comes from state statute, common law, or the trust's own terms; a trustee with no distributive discretion generally cannot decant at all.
The Uniform Trust Decanting Act, adopted in a number of states, ties what a trustee may change to how broad the distribution standard is.
Consent modification and nonjudicial settlement agreements are often faster than court, but they cannot defeat a material purpose of the trust.

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EST-07 · 04

Fiduciary Income Tax: Form 1041, the Distribution Deduction, and Schedule K-1

8 MIN · EST

An estate or trust is a taxpayer with unusually compressed rates. This brief explains how the distribution deduction shifts income to beneficiaries and which elections have to be made on time.

An estate or trust files Form 1041 and is taxed as a separate entity, but reaches the top federal rate at a very low level of retained income.
The distribution deduction moves income out to beneficiaries, who report it on Schedule K-1 with its original character preserved.
Distributable net income caps the deduction and the beneficiaries' inclusion, so income cannot be shifted beyond what the entity actually earned.

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