Mom died on 6/29/14, dad passed away 12 years earlier. I am the executor/trustee/representative for her estate, basically her assets are all in trust already. So it is pretty easy to liquidate her estate. Now, 2014 returns are due, here are my questions.
Her estate was not settled/distributed until 2015, should I file the final return under her name for 2014 or 2015?
We had a special trust account set up referring to her SS with a separate EIN (me as trustee)to receive liquidated assets, her income and expenses all went through her trust as well. So, am I going to report all these activities using her trust and ended up with her personal income or should I stop account for activities on 6/29/2014?
If I stop account for the financial activities as of 6/29, how am I going to file tax returns? Because Turbo tax requires to input SS numbers for beneficiaries as an estate return.
However, when my MIL died (in February, 2012), in April 2013 the accountant filed a final 1040 for her that included all her income and deductions through her date of death plus medical expenses for her final illness paid after she died.
The trust also filed a tax return for 2012, and that return included K-1 information forms for the beneficiaries. The trust’s return was filed using a TIN that the trust applied to get after MIL died. (Prior to her death, the trust had just used MIL’s SS# to report.)
In this specific case, it was also a closing return since everything was wound up at that point.
It was not an “estate tax” return.
(The vast majority of MIL’s assets were in the trust before she died, which sounds similar.)
Our accountant was a big help, and well worth the expense.
To clarify: There were three distinct entities: MIL, the trust, and MIL’s estate. MIL’s estate had very little in it, and so an estate tax return was unnecessary.
I am dealing with a similar situation with my H’s parents.
They both passed away in 2014: their final tax return is for the 2014 tax year and all income attributed to their respective SS# is reported on their final 2014 tax return.
They also had a living trust which held assets: after their deaths, we applied for an EIN for the LT and my H (as trustee) collected all assets that were supposed to go into the LT. The LT owes a 2014 Form 1041 tax return for all income earned by or attributable to the LT.
There really technically is another interim period, during which the decedent’s estate could have received income, but because everything was settled pretty quickly (via TOD and beneficiary transfers and took effect as of their DODs), we did not bother applying for an EIN for their respective estates.
As long as all income is reported either by the decedent or the LT and unless you have a particularly complicated situation, you will need just the final Form 1040 and the Form 1041 (for as long as the trust stays open).
Obviously, you should check with your accountant.
Edited to add: If your parent’s gross estate exceeded $5.34 million in 2014, the estate will owe a Form 706 estate tax return.
I’m not a lawyer or accountant. My mom died in April 2003. we filed a 2003 return…and that was it. Her estate was not closed out until 2004, but she had no income, and neither did her estate.
My dad died on December 31 a year ago. His last return was for 2013. Again…he earned no income in 2014. He also had no estate to settle…he did it all before he died! Smart guy.
I understand now that I have to do a “Final Tax Return” for my mom and basically close all her Living Trust and my dad’s Residual Trust as the date of her death.
Now, we did open a NEW living trust after her death, using HER SS, in which, we accumulated money for distribution. There are incomes and expenses in that trust, including selling her house. The question is how are we going to report on those incomes and expenses? As you know all LT with an EIN should file a 1041, but the actual tax paying entity is an individual who receives a K-1 from the LT.Since we will file mom’s FINAL personal return for 2014 as of her date of death, how are we going to file the returns for the rest of the 2014 and for 2015? I am not talking about the 1041, I am talking about the 1040. In other words, who should I send the K-1 derived from 1041 to and under who’s SS number?
The trust with its own EIN will file a 1041. Whether or not, and who, pays taxes depends on where the trust’s income gets distributed. I don’t think it can be distributed to your MIL after her death. If the income stays in the trust, then the trust pays taxes via the 1041. The trust may also distribute income to its beneficiaries, in which they (you) will get a K-1 from the trust and show the K-1 income on your own 1040.
thank you @dadx3, I did not know that a trust can pay taxes using the 1041. Turbo Tax has asked for a SS and I do not know how to answer, I have always been filing 1041s with a K-1 to her personal SS and 1040. Now I see that you can skip these beneficiary ss questions and go directly to file tax with 1041.
The “new living trust” is actually a testamentary trust, isn’t it? In that it was opened after your mother’s death. If so,it sounds like a “pour over” trust that was funded out of her will. Any way, this testamentary trust can only have an EIN, and can’t use her SS#. It’s an easy matter applying for an EIN online.
thanks @AttorneyMother I think my attorney made a mistake he had instructed me to apply for a testamentary trust EIN with my MOM’s SS. Anyway, the mistake is made, I just have to use that EIN to file the rest of the tax returns.
If there has been no “activity” with your mom’s SS# since your mom’s death, I would proceed with getting an EIN for the testamentary trust. I think that would be “cleaner” going forward. I would be more concerned about having income attributable to your late mother’s SS# instead of either to (1) her estate (new EIN) or (2) the testamentary trust (new EIN).
I don’t think there is a problem with having an “idle” EIN.
We needed a new EIN for the arabrab family trust after MIL died. The 1041 was filed using that EIN. Getting an EIN took about five minutes online at the IRS website. Our accountant specifically said we needed an EIN for the trust at that point.
@ AttorneyMother As I stated before, the testamentary trust EIN was established a month after mom’s passing to collect liquidated funds from other accounts for distribution. The only problem is that we used HER ss as beneficiary. Right now, I am filing a trust return for that trust EIN, hoping that is what all it needs. We also sold a house out of the trust, that is another headache for 2016.
Mom had two trusts which have been finalized, one for her living trust, the other is the Residual trust from Dad. Her personal tax returns have been finalized as well.