Qualified Funeral Trusts

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Qualified Funeral Trusts

The purchasers of pre-need funeral services are the grantors and the owners of pre-need funeral trusts established under state laws. (Rev. Rul. 87-127, 1987-2 C.B. 156) However, the trustees of pre-need funeral trusts can elect to file the return and pay the tax for qualified funeral trusts.

Form 1041-QFT - General Information

A QFT is a domestic trust that meets all of the following requirements:

  • It arose as a result of a contract with a person engaged in the trade or business of providing funeral or burial services or property to provide such services
  • The sole purpose of the trust is to hold, invest, and reinvest funds in the trust and to use those funds solely to pay for funeral or burial services or property to provide such services for the benefit of the beneficiaries of the trust
  • The only beneficiaries are individuals for whom such services or property are to be provided at their death under the contracts described above
  • The aggregate contributions to the trust on behalf of any single beneficiary do not exceed the contribution limit and are made by or for the beneficiaries' benefit
  • The trustee makes or previously had made the election to treat the trust as QFT
  • The trust would have been treated as owned by the purchasers of the contract under the grantor trust provisions of the Code if the QFT election had not been made

Who Must File

Form 1041-QFT - U.S. Income Tax Return for Qualified Funeral Trusts

  • Any taxable income

When to File

  • 15th day of the 4th month after the end of the tax year

Extension:

  • First Extension - Form 8736, 3 month automatic extension
  • Second Extension - Form 8800, 3 month additional extension

Estimated Taxes

Generally follows individual rules:

  • If you expect to owe, after subtracting any withholding and credits, at least $1,000 in tax
  • Safe Harbors of: 90% of current year's tax, OR 100/110% of last year's tax.

Accounting Period

All QFTs must use a calendar year as its accounting period.

Making the QFT election

The trustee makes the election to treat a trust as a QFT by filing Form 1041-QFT for the trust by the due date (including extensions). QFT status may be elected for the trust's first eligible year or any subsequent year. Once made, the election may not be revoked without the consent of the IRS.

Amended Return

  • Check the Amended Return box on the front of Form 1041

Final Return

  • Check the Final Return box on the front of Form 1041
Personal tools