Discussion:1041: Probate Estate vs. Irrev Trust
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Discussion Forum Index --> Tax Questions --> 1041: Probate Estate vs. Irrev Trust
| 13 August 2008 | |
| Client died on 12/25/06. She had a living trust before she passed. However, since not all assets were transferred to the living trust before she passed, some of her assets went through probate. All assets were investment/bank accounts only, no real estate was involved. Those assets that went through probate went into the living trust bank account at the end.
Do I need to do a 1041 (on 2006 form) for the Decendent Estate (12/26/06 till it closes in 2007)? Or can I simply put everything on a 1041 for a Complex Trust (the trust doc does not require distribution of income, so it is a complex trust)? Any advise will be appreciated. Thanks. | |
| 13 August 2008 | |
| You have to account for the probate estate.
How did the probate estate get into the living trust, which is now irrevocable? How long ago was the trust document drawn up? It's possible that the trust is not part of the estate. | |
| 13 August 2008 | |
| Internal Revenue Code:Sec. 645. Certain revocable trusts treated as part of estate
BarbCPA: pourover will | |
| 13 August 2008 | |
| §645 requires an election that most likely cannot be made in this case. Separate returns would need to be filed for the trust and estate. The initial trust return would have to be 12/31/06. If the estate closed before 11/30/07 an initial/final return can be filed with the K-1 to the trust included in its 2007 return. | |
| 13 August 2008 | |
| Dennis, it looks like §645 election should help, but you said it cannot be made -- is it because we are late?
"§645 election shall be made not later than the time prescribed for filing the return of tax imposed by this chapter for the first taxable year of the estate (determined with regard to extensions)" She died 12/25/06, so we can have the fiscal year closes on 11/30/07 at the latest, a six month extension would have pushed us out to 5/30/08 and give us till 09/15/08 to file the first estate 1041, in which case we can still have the §645 election. But an extension was not filed in this case. | |
| 14 August 2008 | |
| Yes, it's too late to make the Sec. 645 election. If you use 11/30/07 as the closing date, the return would have been due 3/15/08 (3 1/2 months after the close of the year). | |
| 14 August 2008 | |
| In addition, the estate year most likely ended with the month the assets were distributed to the trust, not 11/30.♫ | |
| 14 August 2008 | |
| Okay, looks like we are out of luck with the Sec. 645 election. We will go with 1041 for the estate with a K-1 to the Trust, and another 1041 for the Trust.
Thank you all for the advise and the help -- I LOVE(!) the TaxAlmanac! | |
