Changing Accounting Year for Estate's Form 1041; When To Pay Executor

The answer probably depends on the laws of the state you are in. Assuming you are executor (rather than trustee), in California any execotor's fees have to be approved by the probate court. That may be different in your state - you should talk to a local probate lawyer about your options.

Instead if you are successor trustee, it is really up to you, as long as what you pay yourself is reasonable under the circumstances. What that would be can also vary depending on your professional qualifications. For example in San Francisco, for someone who is acting as trustee who is not a professional (i.e. lawyer or accountant) the courts are approving fees of about $50 per hour. If you are an accountant, a court could well approve your normal billing rate. Again, you should talk to a local probate lawyer for guidance.

In some cases like this the charity will facilitate the probate of the estate and the preparation of all related paperwork/tax returns. Might be worth asking them if you haven't already.

MTW

No one answered your first question. Regardless of what you entered on the SS-4, the tax year for the estate is established when the first return is filed. Assuming you can wrap everything up before July 31, 2020, a fiscal year ending 07/31 would be best -- a single return serving as both initial and final return.

Ira Smilovitz, EA

Thank you, Stuart, MTW and Ira.

-- Stuart, as interested, the attorney who wrote the will was emphatic that executors should take payment and said charging $25 to $35 per hour in 2019 is usual where I am. My state's probate code does not require court approval of the executrix's fee (unless the beneficiary challenges my expenses?). The probate code where I am does require the executor to provide a detailed accounting to devisees. This is in good shape. The devisee knows the accounting is coming, following the distribution(s) from the estate.

-- MTW, the attorney who wrote the will counseled me that the charity would seek a copy of the will from me. When the charity did, the attorney told me to tell them, in no uncertain terms, "No." My state's probate code allows this. My state's probate code does require executors to provide formal notice to all devisees. As soon as the charity received notice, and as predicted by the aforementioned attorney, the charity instantly asked for a copy of the will. I told the charity, 'No' and that I understand the probate code in my state supports my position. So I do not think I can ask for the charity's assistance on anything involving minutiae of the will or even much else and be complying with my fiduciary duty. The charity has been great otherwise: By the book but cordial, respectful to the deceased, and appreciative.

-- Perhaps as importantly, the will gives the executor (me) discretion on distributions of "the income to the estate," like interest on the cash sitting in the estate's money market account. So far the income to the estate appears to be low enough that the Form 1041 tax rate is about 10%. The estate will owe maybe a few hundred dollars to the federal government. I do not see a need for anything but maybe, bottom line, zeros to go on a Schedule K-1 (if a schedule k-1 is even needed?). Meaning the charity will not have to expend its labor and funds paying taxes on the small amount of "income to the estate." The estate will pay these taxes. (If anyone has any comments on the paragraph herein, I am all eyes.)

-- Ira, perfect. Thank you. Figuring out when to make the bulk of the distribution of the estate's assets; when to submit the Form 1041; the tax rules so I can understand what is going on if and when the CPA prepares the return; and related requirements had saturated my mind. I think I have a half-decent handle on the big picture at this point.