Mastering Fiduciary Accounting Income for Estate Planners and Administrators

A critical and often overlooked task for estate planners, administrators, and trustees is navigating the rules governing FAI. FAI is the amount generally available to distribute to income beneficiaries of a trust or estate. It is different from both taxable income and distributable net income, both of which are tax-related concepts. Estate planners and administrators must have a thorough understanding of FAI principles to allocate income and expenses accurately and distribute assets equitably.

The starting point for determining FAI is the operating instrument, such as a will or trust agreement. Where the operating document is unclear as to an income receipt, an expense item, or a distribution item, the FAI determination defaults to the state law of the trust situs. Most states have incorporated the UPIA, with some local differences. However, fiduciary accounting principles determine the timing and amount of distributions to beneficiaries.

Another critical skill is reconciling FAI to both distributable net income and trust taxable income. Accountants and lawyers representing fiduciaries must grasp the critical differences between fiduciary accounting and tax accounting to avoid both tax consequences and beneficiary challenges.

Listen as our experienced panel provides a deep and practical guide to what estate planners must know to master FAI beyond the basics.

• Specific challenges in allocating income and expenses to FAI
• UPIA factors in calculating FAI
• Impact of FAI on trust distributions
• Tax considerations such as distributable net income inclusion on distribution strategies
• Planning considerations and traps to avoid

The panel will review these and other key issues:

• How operating documents impact FAI calculations
• Interpreting state laws and UPIA provisions in circumstances where operating documents are silent or inconclusive
• Reconciling FAI to distributable net income and trust taxable income
• How FAI determines distribution amounts and timing

Learning Objectives

After completing this course, you will be able to:

• Understand how operating documents impact FAI calculations
• Recognize key issues and methods for reconciling FAI to distributable net income and trust taxable income
• Ascertain how FAI determines distribution amounts and timing

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and sole proprietorships, qualified business income, net operating losses and loss limitations; familiarity with net operating loss carry-backs, carry-forwards and carried interests.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.