Preneed: A Pandora's Box of Problems
We continue our discussion of the composite Federal Form 1041QFT with a post about the individual account statement.
With the composite return, income and expenses are allocated to the individual preneed account and taxes are computed at that level rather than at the trust level. To allow the IRS to test the composite tax liabilities,…
There are two methods for preparing a Federal Form 1041QFT. One method has the trustee applying the QFT tax rate schedule to the preneed trust’s net income. For larger preneed trusts, this method will likely trigger the highest tax rate (37%). The other method is called the composite return, where trust income and expenses are…
Tax Code Section 685 has now been law for 21 years, and this marks our 20th year of preparing the Qualified Funeral Trust return. (And more specifically, the composite QFT return) The QFT return was meant to simplify income reporting for a trust that has hundreds, or even thousands, of contract beneficiaries. Yet, we…