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Discussion:Disability Trustee, Living Trust, and 1041

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Discussion Forum Index --> Advanced Tax Questions --> Disability Trustee, Living Trust, and 1041


Discussion Forum Index --> Tax Questions --> Disability Trustee, Living Trust, and 1041

Riki EA (talk|edits) said:

1 April 2014
Hello all,

Hope you are bearing up. When I was studying for the EA exam, I remember learning that when a disability trustee takes over as trustee for a revocable living trust, the living trust should obtain a EIN and file an otherwise blank 1041 each year with a statement that the living trust's owner is no longer trustee because of incapacity. The income is still directly reported on the 1040 so no actual K-1 is required.

We have a new client whose mother entered a nursing home last year. The daughter is now named as trustee for her mother's living trust. I no longer have my study materials, and I'm having trouble finding any guidance on this issue. Some research mentions doing a full Form 1041 with a K-1 in this situation, but this seems overkill. As of now, all the dividend statements of the living trust still are reporting income under the mother's SSN, so we are reporting it on the Form 1040 as in previous years.

I have searched using the yellow box without success. Any one with experience in this area? Thanks! Riki

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