Estate return or trust return????

[oceanlovin'ea]

Client died in March 2017. She had a revocable family trust already set up and the income was just passing through to her. Now that she has died the trust is still in existence.
It will continue to exist for the next 10 years as one of the beneficiaries gets a monthly check from the trust for the next 10 years.
I just now got the paperwork for this account. So I have to file extensions for both her personal return and the estate/trust return. the program asks me to select type of entity this is.
I don't know what to choose. Decedent estate doesn't seem to fit as this will continue. I would think estate would only be for a year or two. But Grantor trusts doesn't seem to fit either.
She would have been the grantor but she is dead....can't grant or make decisions anymore.

So what kind of entity is this?

Linda F

[taxea]

Client died in March 2017. She had a revocable family trust already set up and the income was just passing through to her. Now that she has died the trust is still in existence.
It will continue to exist for the next 10 years as one of the beneficiaries gets a monthly check from the trust for the next 10 years.
I just now got the paperwork for this account. So I have to file extensions for both her personal return and the estate/trust return. the program asks me to select type of entity this is.
I don't know what to choose. Decedent estate doesn't seem to fit as this will continue. I would think estate would only be for a year or two. But Grantor trusts doesn't seem to fit either.
She would have been the grantor but she is dead....can't grant or make decisions anymore.

So what kind of entity is this?

Linda F

Do you have the Trust document? Sounds like a Grantor Trust, complex trust. Is there a named Trustee? Or a designated amount to be held in trust for the one beneficiary? Hard to give more advice without more info. Feel free to call or email if you have my info.

[Burke]

Client died in March 2017. She had a revocable family trust already set up and the income was just passing through to her. Now that she has died the trust is still in existence.
It will continue to exist for the next 10 years as one of the beneficiaries gets a monthly check from the trust for the next 10 years.
I just now got the paperwork for this account. So I have to file extensions for both her personal return and the estate/trust return. the program asks me to select type of entity this is.
I don't know what to choose. Decedent estate doesn't seem to fit as this will continue. I would think estate would only be for a year or two. But Grantor trusts doesn't seem to fit either.
She would have been the grantor but she is dead....can't grant or make decisions anymore. So what kind of entity is this?Linda F

Normally the Executor and/or Trustee(s) have the option to elect to treat the trust as an estate, basically one entity. (Section 645 Election, see Form 8855 and instructions.) However, the election must be made during the election period which is two years, so if the trust is going to extend 10 years at a minimum, it may not be feasible. Does the estate have any probate assets? Or does it all pour over into the trust? An estate can elect a fiscal year, which is an advantage sometimes, and that would mean the filing deadline would be June 15. This trust is treated as a complex trust since you seem to indicate there are different payout provisions for different beneficiaries? Does the trust/and or estate have an EIN? Nothing will be in the trust document about this option, which is allowed by law if it qualifies under the IRC code.

[oceanlovin'ea]

details

Yes there is an EIN. I think all the assets are investments. She didn't own any property any longer. I think we are going to keep a calendar year return. I did an extension so I have some time to learn more and get this finished up.
I think I need to read the trust document ( that is if I can understand what it says) for more details. At least for this past year, the earnings are enough to pay adopted son his monthly check without selling any of the investments.

Thanks

Linda F

[Burke]

If there are no probate assets, you don't need an estate return, so do not apply for another EIN. 2017 Trust return would be due 4/17, later if extension filed and a calendar year return is your only option. Usually wills done in conjunction with RLT's have a provision that sweeps up any assets hanging out there which were not already in the trust at death. The trust document primarily lists the beneficiaries and the method of distribution of the monies held in the trust, for now and in the future. It does not give any information about IRS filing requirements.

[Gretel]

Burke

Usually RLT's have a provision that sweeps up any assets hanging out there which were not already in the trust. The trust document primarily lists the beneficiaries and the method of distribution of the monies held in the trust, for now and in the future.

Burke, I am trying to get a good answer in my head. I trust and value your opinions and posts, especially on the subject matter. Until about two years ago I believed that the "sweeping provision" would avoid probate but at that time I learned from TTB message board (or believe to have learned) that this is not the case. Yes, the assets end up in the trust, but not before going through probate.

Can you please clarify? I must have misunderstood something. I assume Probate Courts operate the same way in all States, only exempt items and amounts are different.

[Burke]

You would be astonished at how differently probate courts handle things, even within the same state! I have done estate accountings in various states, and jurisdictions within my own state and you would think it is the same, especially in the same state, as everyone has the same rules, but it is not. (The worst one I ever did was SC. I practically had to re-write the form, but the clerk said it was the best one she had ever seen.) If there were assets not titled into the trust when she died, she may have a probate estate. States vary on the maximum amount necessary to probate, so if minor, it may be a very simple process, especially if no real estate is involved. The will usually contains the pour-over clause. PR should determine if probate is required by contacting the local court which has jurisdiction.

[Gretel]

Thanks, Burke, that's very interesting, I also remember you once talking about the SC nightmare. My case that I remember, had over $100,000 in CD's, this one account was just never transferred into the trust. Only later did I learn (maybe) that it should have gone through probate, technically. I wished I had kept the information. I say technically since the banks in my little town have no clue and are just glad to close such accounts asap. Now it seems I am basing my judgement on something that isn't right, I didn't want to go into that trap again. Next time I will contact the court, they should have a straight answer.

[Burke]

Thanks, Burke, that's very interesting. My case had over $100,000 in CD's, this one account was just never transferred into the trust. Only later did I learn (maybe) that it should have gone through probate, technically. I wished I had kept the information. I say technically since the banks in my little town have no clue and are just glad to close such accounts asap. Now it seems I am basing my judgement on something that isn't right, I didn't want to go into that trap again. Next time I will contact the court, they should have a straight answer.

If the CD had a TOD or POD designation with a named beneficiary, it did not have to go through probate. And you are correct, sometimes the banks (especially local ones) effect these changes because they don't know the rules, and all is well in the end. The probate process is public, and if there is more than one heir, even ones no one knows about that may surface later, it can protect the PR/Executor from a lot of headaches. Every TP should review their wills/RLT's/trust documents every year or so to determine that all their assets go to where they want them to. In my state, you must list joint & survivor accounts or TOD accounts even though they are not considered in the probate process; they can always be attached if circumstances warrant. A deceased person may not transfer all their assets to others and avoid debts and last expenses, etc. An executor/personal representative assumes all this responsibility.