How to Calculate Interest and Dividends for a Decedent, Estate, or Trust
How to File for Tax-Exempt Status for Your Foundation
Penalties and Extensions for Estate Taxes

Charitable Deductions for a Decedent, Estate, or Trust

An estate administrator can only give money from an estate or trust to charity if the decedent’s will (or the trust instrument) explicitly instructs it. Because this rule is absolute, charitable deductions on an estate or trust income tax return are rare. Use Schedule A on Form 1041 to calculate deductions for charitable donations made in accordance with the will.

Seek professional advice when dealing with trusts with charitable interests.

If the terms of the decedent’s will direct that you give a percentage of the estate to charity, you calculate the charitable deduction on Schedule A, on the back of Form 1041. Other times, charitable deductions can occur when the trust or estate owns a partnership or S corporation interest, and that entity gave to charity. Since the decision to give wasn’t yours, you may take the deduction.

Frequently, donors establish trusts with either whole or partial charitable interests, and fund them either by gifts made before death, or from their estates after death.

These trusts may either be set up as private foundations, or as charitable lead (or remainder) annuity trusts, or Unitrusts. These are types of split-interest trusts where the grantor (the decedent) retains an interest in the trust during his or her lifetime.

In most cases, these trusts don’t file a Form 1041, and the returns they do file (Forms 5227 or 990-PF) are extremely complex.

If you’re named as trustee for one of these types of trusts, find a tax professional experienced with these returns who can assist you in tax preparation. Most tax professionals don’t prepare these returns, so be sure that you find someone who has the expertise you need.

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