Calculating Fiduciary Accounting Income for Trusts: Interpreting Operating Documents, Applying UPIA and State Law

Reconciling FAI to DNI and Trust Taxable Income, Avoiding Tax and Beneficiary Challenges

Recording of a 110-minute CPE webinar with Q&A

Conducted on Tuesday, June 21, 2016

Recorded event now available

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Program Materials

This webinar will provide tax advisers and compliance professionals with a comprehensive guide to navigating the complexities of calculating fiduciary accounting income (FAI) for trusts and estates. The panel will detail how to interpret key trust and estate provisions to apply to FAI calculations, and will identify tax traps and planning considerations in maintaining FAI computations. The panel will discuss the fundamentals of FAI calculations using typical real world examples.


The critical first step to completing a Trust Income Tax Return is the calculation of FAI, also sometimes referred to as trust accounting income (TAI). FAI is the amount generally available to the income beneficiaries of a trust or estate. It is different from both taxable income and distributable net income, both of which are tax-generated concepts. The starting point for calculating FAI is the operating instrument, such as a will or trust agreement. Tax professionals working on trust returns must have a firm grasp of how to apply the operating documents to an FAI calculation.

Where the operating document is unclear as to an income receipt, an expense item or a distribution item, the FAI calculation defaults to the state law where the situs of the trust is located. Most states have incorporated the UPIA, with some local differences. However, the timing and amount of distributions to beneficiaries is determined by fiduciary accounting principles.

Another key skill is reconciling FAI to both distributable net income and trust taxable income. Accountants and lawyers representing fiduciaries and beneficiaries, need to be able to identify the critical differences between fiduciary accounting and tax accounting to avoid both tax consequences and beneficiary challenges. With blended families, the differences can cause turmoil.

Listen as our experienced panel provides a deep and practical guide to mastering fiduciary accounting income beyond the basics.



  1. Tax definition of FAI/TAI
  2. UPIA factors in calculating FAI
  3. Impact of FAI on trust distributions
  4. Planning considerations and traps to avoid


The panel will discuss these and other important 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 DNI and to trust taxable income
  • How FAI determines distribution amounts and timing


Jeffrey M. Bergman
Jeffrey M. Bergman

Schiff Hardin

Mr. Bergman works with a broad range of individuals and families to design and implement estate plans, helping...  |  Read More

Sanger, Howard
Howard L. Sanger

Sanger & Manes

Mr. Sanger has over a quarter century of experience in estate planning, trust and estate administration, tax...  |  Read More

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