CTFA cheat sheet

Fiduciary duties include loyalty, impartiality, prudence, confidentiality, and the duty to account to beneficiaries.

The prudent investor rule evaluates investments in the context of the whole portfolio, considering risk and return, diversification, liquidity, and costs.

A trustee may not engage in self-dealing unless the trust instrument or applicable law expressly authorizes the transaction.

Co-trustees generally must act unanimously unless the trust authorizes majority action or delegation.

A trustee may delegate investment and management functions if prudent, but must select and monitor the agent and retain oversight.

The Uniform Principal and Income Act allocates receipts and expenses between income and principal; the trust terms control if inconsistent.

A revocable trust is administered for the settlor during life; the settlor usually retains powers to amend, revoke, and direct investments.

An irrevocable trust can be modified only by consent, court order, decanting, or a trust protector if authorized by the instrument or law.

A successor trustee should review the trust, inventory assets, identify beneficiaries, and provide required notices and accountings.

IRC sections 2033 through 2042 determine property included in a decedent's gross estate, including retained interests, revocable transfers, powers of appointment, and life insurance.

The unlimited marital deduction applies to qualifying transfers to a surviving spouse, including QTIP property that meets statutory requirements.

The annual gift tax exclusion applies per donee and is indexed; gifts above it use the donor's lifetime exemption unless another exclusion applies.

Property included in a decedent's gross estate generally receives a new basis equal to fair market value at death under IRC section 1014.

Portability allows a surviving spouse to use the deceased spouse's unused exclusion amount if a timely estate tax return elects it.

A general power of appointment causes inclusion in the holder's gross estate; a limited power generally does not.

Intestacy statutes distribute property when there is no valid will; nonprobate assets pass by beneficiary designation, joint tenancy, or TOD/POD.

A QTIP trust qualifies for the marital deduction if the surviving spouse receives all income at least annually and no person can appoint the property to anyone other than the spouse during life.

Generation-skipping transfer tax applies to transfers to grandchildren or other skip persons and has its own exemption and allocation rules.

Asset allocation should reflect the beneficiary's time horizon, risk tolerance, liquidity needs, and the trust's distribution requirements.

Diversification reduces unsystematic risk; systematic market risk remains and is measured by beta.

The Sharpe ratio equals portfolio return minus risk-free rate, divided by portfolio standard deviation.

Duration approximates a bond's percentage price change for a 1 percent change in yield: change is approximately negative duration times yield change.

Time-weighted return measures investment performance excluding cash flow timing; money-weighted return reflects investor cash flows.

Rebalancing restores target weights; threshold rules trade when allocations drift beyond set bands.

Tax-aware asset location places tax-inefficient assets in tax-deferred accounts and tax-efficient assets in taxable accounts when suitable.

Capital needs analysis estimates life insurance or savings needs by subtracting available resources from projected obligations.

A fiduciary investment policy statement documents objectives, constraints, risk tolerance, and monitoring procedures.

Form 709, the gift tax return, is generally due April 15 of the year after the gift; extensions may apply.

Form 706, the estate tax return, is generally due nine months after death; a six-month extension may be requested.

Form 1041 reports income for estates and trusts; distributable net income limits the deduction for distributions and determines beneficiary taxation.

Grantor trust rules tax the grantor, not the trust, on income from trusts where the grantor retains specified powers or interests.

Simple trusts distribute all income currently, make no charitable contributions, and do not distribute principal; complex trusts do not meet those tests.

The section 645 election treats a qualified revocable trust as part of the estate for income tax purposes during the election period.

Basis consistency rules require certain estate tax filers to report beneficiaries' basis to the IRS on Form 8971 with Schedule A.

Fiduciary accounting income follows the governing instrument and state law, while taxable income follows the Internal Revenue Code.

Trust estimated tax payments are generally required if the trust expects to owe tax; safe harbor rules can avoid underpayment penalties.