trust title question

[bgiez]

My client is the successor trustee and sole beneficiary of his relative's trust. The relative died in 2010. My client applied for an EIN for the trust. The IRS notice assigning the EIN shows the title of the trust as:
Relative's Name INTRVS RVOC TR
My Client's Name SUCC TTEE

Is this correct? Still showing as revocable? Revocable trusts are disregarded entities for tax purposes, aren't they? But is it really revocable? Should I ignore the title?

Thanks for any input.
Barbara

[Burke]

An RLT becomes irrevocable at grantor's death. If the successor trustee retains the trust, then he correctly applied for an EIN. If the trust assets are to be fully and completely disbursed to the beneficiary, he needn't have done it. The IRS listed it as such probably because the trustee/bene put that on the form when he applied for the EIN, or sent them a copy of the trust document. It is titled correctly. It is no longer a disregarded entity, however, and if it is to remain in effect, then a trust tax return 1041 will be filed if necessary.

[bgiez]

Thanks, Burke. Now here's a wrinkle...

Client said he could not transfer the home to his name because there was still an outstanding lien for a home equity loan, which he is paying off.

And, he's paying it off by renting the house with and option for the renter to buy the home. (It didn't sell when he put it on the market in June, so he decided to rent it with the option in September. I'm waiting for a copy of the agreement so I can see what the real story is.

Barbara

[Burke]

I am assuming the title to the house was changed by the grantor before his death to put it into the trust? If not, it is an estate asset. Either way, it looks like you are doing a 1041 as long as either one has assets or income.

[bgiez]

Thanks, again Burke, but here's another wrinkle...

Just read the copy of the lease, which is a "fill in the blank" with dollar amounts, etc. Handwritten at the end is a statement for option to buy at the end of the 12 month lease, with a portion of each month's rent and the security deposit applied to the purchase price. The purchase price includes appliances and lawn maintenance equipment. (won't we have fun determining the sales price of those items) The final handwritten statement, after everyone signs, is "The price in 12 months to be $77,500.

The security deposit, if the option is not taken, is to be returned to the lessees unless needed to pay for damages, unpaid utilities, or to be applied to unpaid rent if they leave before the end of the lease.

I will have to check with my client to see if the title was really changed, because it's not showing that way on the county's parcel look-up website.

Thanks again.
Barbara

[Burke]

I will have to check with my client to see if the title was really changed, because it's not showing that way on the county's parcel look-up website.
Thanks again.Barbara

Yes, it is amazing how many people forget that little detail. I'm betting it wasn't, so it is not even in the trust. Is anything else? Soooo, if the house is an estate asset, get ready.....he needs another EIN. And the trust does not control it, the will does. Sometimes the will, if it is done correctly, has a pour-over provision that sweeps up anything left out and "pours" it into the trust. Also, the executor can elect to treat the trust as part of the estate by making an election on the 1041 estate return. This is helpful sometimes since then you don't have to do two separate tax returns.