A taxpayer dies, he has some money in a bank account and continue to earn interest. Does that mean his relative will have to file an estate tax return for him every year until the money is distributed to a heir?
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Estate Tax Return
Let's clear up a number of facts.
An estate tax return is only a 1 time filing and even then only if it's necessary (estate assets exceeding a limit of $ 5 million).
The amount of the principal in the account determines if an estate return is necessary.
You did not specify a dollar range so I must assume that it's way below the Federal exemption. What your state requirement is, you have to determine. That often is lower than the Federal requirement.
The requirement to determine if a FIDUCIARY return (Form 1041) is necessary depends on whether the taxable income exceeds the $ 600 annual threshhold. That's the form that's an annual filing until the estate is closed out.
Think of it like this -
Estate Return - Form 706 = Balance Sheet information
Fiduciary Return-Form1041 + Income Statement informationUncle Sam, CPA, EA. ARA, NTPI Fellow -
The estate (not the deceased) files an income tax return if the interest exceeds $600 per year during the estate tax year, as stated above. This is because the estate has a standard deduction on the 1041 income tax return of $600, so nothing under that generates a tax liability. The bank account should be changed to the estate's name with an estate EIN using form SS-4 as soon as possible after death. No tax return is filed for the deceased for a tax year after the year of death, and the final 1040 includes only income up to the date of death in that year, regardless of what any 1099 might say.Originally posted by Questionguy101 View PostComment
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Estate Tax Return
Father of taxpayer died in 1995. Taxpayer obtained an EIN # for estate/trust. They filed no 706 or 1041 from 1995 until 2008. Father owned house with a mortgage at date of death. In 2009, taxpayer filed a 1041 tax return as a "decedent's estate" return marked and name shows "JoBob's Family Trust". I am going to request the trust document from taxpayer but was hoping to get a few things clear in my head first....
1. Is it normal for an estate to go on from 1995 to current? Taxpayer began renting the house in 2010 but did not file a return.
2. I ffirst thought that maybe the house had been put into the trust; however, the taxpayer gave me a copy of a mortgage statement that she wanted to claim as a deduction on estate tax return, but statement is in father's name and father's social security #. Mortgage statement is not in trust's EIN #. I would not think house would be in trust if loan is still in father's name - is my thought process correct?
3. Shouldn't the property be transferred to beneficiaries by now if not in trust?
Any help you can provide will be greatly appreciated.Comment
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No, but it is normal for a trust to go on like that. It might be a trust established by the will, or a trust established prior to death. The latter would most likely have started as a grantor trust, becoming a non-grantor trust upon death of the grantor.Originally posted by peggysioux View Post
Time to check with a lawyer. It's conceivable that the house effectively belongs to the trust whether or not title has been recorded, and whether or not the mortgage company was notified.2. I ffirst thought that maybe the house had been put into the trust; however, the taxpayer gave me a copy of a mortgage statement that she wanted to claim as a deduction on estate tax return, but statement is in father's name and father's social security #. Mortgage statement is not in trust's EIN #. I would not think house would be in trust if loan is still in father's name - is my thought process correct?
Yes, unless there's some other interest in the property, such as a life estate.3. Shouldn't the property be transferred to beneficiaries by now if not in trust?Comment
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