The most immediate hazard for trustees is that if they continue to invest in bonds and other very conservative investments without diversification, they can be held liable to the remaindermen long after they have made the investment decisions. Income and Corpus Errors . During the course of administration, the fiduciary may need to determine which assets are principal and which assets are income. Stock splits, bond premiums or discounts, and closely-held businesses will all raise this issue. Different types of expenses are chargeable either to the income beneficiaries or to the principal.
Some expenses are to be charged in equal parts to the income and to the principal.
Failure to Make Timely Tax Elections . An executor or administrator is allowed to deduct as administration expenses either as an income tax deduction or an estate tax deduction. There are other elections which can be made, including the method of valuation of assets. All of these elections have time limits. Failure to File Estate and Inheritance Tax Returns .