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    Trust's

    Not sure why, but estate and trust matters are always confusing to me.

    Joe Smith is my client.

    My clients mother, Susan, passed away.

    Joe says there is no estate because with mothers passing everything is already titled in the name of a trust,

    He provided me with brokerage statements for 2 accounts, they are under the name, "Joe Smith, Revocable Living Trust", Joe Smith Trustee.

    He previously applied for and received an EIN for the "Trust" and that number is on the brokerage statements.

    He says that his brother Mike is the beneficiary of the trust.

    The trust eraned about $5,000 in dividend income, and has no expenses.

    The Trust distributes the earnings to Mike every year.

    So I am guessing that I file a 1041, with a k1 form to Mike and the entire $5,000 of dividend income flows through to Mike.

    Does it appear odd that the name of the Trust uses the words "Revocable Living Trust"

    I thought that Revocable Living Trusts were only in existence during the live of the grantor, and then at death a new entity is created with a diferent name?, ie, "Smith Family Trust" or something like that?

    Also I thought, that while the grantor is living, the "Revocable Living Trust" is ignored for tax purposes and any income is simply reported on the 1040 of the grantor.

    So I gues the question is, is it considered proper that I will be filing annual 1041 trust returns with an entity using the words "Revocable Living Trust" in it's name, or, will this look odd with IRS.

    Thanks,
    Harvey Lucas

    #2
    Trust

    You are correct that a revocable living trust, during the lifetime of the grantor, is usually a "disregarded entity." But not always. It is a choice.

    If it was a disregarded entity, it would not have its own EIN, and all income of the trust would have been reported on the grantor's Form 1040--not some other beneficiary.

    A revocable living trust becomes irrevocable upon the death of the grantor. If it was a disregarded entity, it ceases to be a disregarded entity at that point. Normally, you have to apply for an EIN for the first time upon the death of the grantor.

    But this thing already has an EIN, and it was passing income to a beneficiary other than the grantor.

    It seems like it wasn't a disregarded entity.

    I'm not sure whether you need a new EIN. Probably not, but I'd have to look that one up.

    I wouldn't worry too much about the name. The trustee may have the power to change the name of the trust. But that may be more trouble than it's worth. It'll drive the banks and brokers nuts. They probably won't agree to change the title on the accounts without a court order or something.

    What if you just changed the name by adding a couple letters in the middle?

    I'll bet no one at the IRS or the financial institutions would notice...

    You could just add the letters IR [LMAO]



    BMK
    Burton M. Koss
    koss@usakoss.net

    ____________________________________
    The map is not the territory...
    and the instruction book is not the process.

    Comment


      #3
      Thank You

      Thanks Burton

      Comment


        #4
        I have seen many RLT's with EIN's. (They did not know they did not need them.) There seems to be no problem simply using the existing EIN now that the grantor is deceased. Unless the trust documents specified that all assets were to be distributed at death, then the trust continues in existence and there is no need to change the name. But you say it has no expenses? There will be a charge to do the tax return at the very least, plus perhaps fiduciary fees, accounting and filing fees to the court (if reporting is required), sometimes management fees at the brokerage, etc. So all these are deducted from the taxable income on the 1041, which results in an adjusted amt passing thru to the bene as income. As a result, he may receive $5K, but only -- say -- $4K may be taxable, for instance.

        Comment


          #5
          Thank You

          Thanks Burke

          Comment

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