Estate return

[oceanlovin'ea]

I have a client that died Jan of 2008. ML was handling her investments and she received income from a trust that her husband set up before he died. So ML handled all of that.

Last year they did his 1041 and sent me the K-1 for his trust. Since she died this January, they were going to handle same way. But when they sent paperwork to me, they included a K-1 for her estate.

I think this was wrong. She was alive on December 31st. She should just file a regular 1040 and the representative of her estate will have to sign the return. Then next year they will do a 1041 estate tax return for her since she died in January 2008.

Am I correct or have they done it right?

Linda F

[Bees Knees]

Not sure I understand your question. Do you mean they prepared a 1041 for her estate already? Of do you mean they issued the K-1 for 2007 from her husband’s trust to her estate, even though her estate did not come into existence until January of 2008?

Assuming you mean the later, I would simply report the husband’s K-1 on her final 1040, even if it is issued using her estate ID number. Her estate is not even going to file a 2007 1041. If IRS questions why her estate did not file or report the K-1, explain to IRS her estate did not come into existence until January of 2008.

[oceanlovin'ea]

They filed a 1041

I mean that they filed a 1041 for her estate for 2007. She didn't have an estate until she died in 2008. Isn't that right?

So for 2007 for her I should be filing a regular tax return, shouldn't I?

Linda F

[Bees Knees]

If they filed a 1041 for 2007 and she was not deceased yet, they made a mistake. Before doing her final 1040, I'd get them to correct the error, or at least don't file the 1041 they prepared. You don't want to be reporting the same income on a 1041 and a final 1040.

[LMathey]

If she was alive on 12/31 then no way should they prepare a 1041 for her estate for 2007. In order to do a 1041 for her estate for 2008 they should be discussing with attorney and executor and selecting a year-end. Who is ML...not Merrill Lynch??? In addition, her estate 1041 would never be issued to her anyway...those K-1's would go to her heirs. In addition, depending on what the terms of her husband's trust were it will probably also be distributed according to the terms of his trust.

[oceanlovin'ea]

Merrill Lynch

Yes ML is Merrill Lynch.

Her husband's trust was set up so that she received the income from the trust until she died and then the holdings went to charity.

Her estate was set up to go to charity upon her death also. Nothing to family.

I will call ML office that sent the paperwork to me and have them correct their error.

Linda F