Fremont, CA · Member since 2012 · 122 posts · 18 votes
So I've already gotten one surprise in this adventure... I discovered that dad's Living Trust becomes an irrevocable trust upon his death. I've already gotten an EIN for the trust, but I'm really unclear on how I do his final taxes this year... the IRS site says I need to submit form 1041 for "trust-related income"... but what about the rest of his tax environment??
I've been doing his tax returns for 9 years now; the tax elements in his accounts have been: 1. medical expenses (especially the $9300/month for assisted living facility) 2. rental income for renting out his house 3. income from pension, social security
4. everything else
In the past, he had a revocable Living Trust, and all tax issues were handled using 1040 and his SSN. Does *everything* now go on the 1041, or do I have to do two separate tax returns??
"And BTW, what would be the consequences, if any, if I just disregarded all this and filed the normal 1040 with 'person is deceased' checked, like I did when mother died?"
You would knowingly be preparing an incorrect 1040. Please don't do this.
And BTW, what would be the consequences, if any, if I just disregarded all this and filed the normal 1040 with 'person is deceased' checked, like I did when mother died?
He died in Oct, so we're only talking two months of overlap.
and yes, the trust specified disperse all assets upon death, which I have already done. (I am both successor trustee and sole beneficiary)
First, my condolences. A death in the family is a difficult enough thing to deal with before tax and legal obligations even enter the picture.
I agree with @Carl Fischer that you should work with both an attorney and tax CPA to make sure everything is done by the book and smoothly.
It's difficult to tell what your father's filing obligations are from the information posted, but it appears he'll have at least a final 1040 for the year of death, and a 1041 for the now irrevocable trust.
Might also have a 1041 for the estate's income, and a 706 for the estate itself depending on value. A CPA can help you sort all of this out and streamline everything for you.
"And BTW, what would be the consequences, if any, if I just disregarded all this and filed the normal 1040 with 'person is deceased' checked, like I did when mother died?"
You would knowingly be preparing an incorrect 1040. Please don't do this.
Aye, thank you all; I will do that, early next year.
I'm a little confused about the recommendations to talk to two different people (attorney and CPA); is there a division between the questions that I would ask each?? If so, I don't know what they are... Should I start with tax CPA, and bring in an attorney afterwards if I still have questions afterwards??
Aye, thank you all; I will do that, early next year.
I'm a little confused about the recommendations to talk to two different people (attorney and CPA); is there a division between the questions that I would ask each?? If so, I don't know what they are... Should I start with tax CPA, and bring in an attorney afterwards if I still have questions afterwards??
The tax CPA can properly advise you on all the required filings and closing the estate/Trust with the IRS. The attorney will assist with the estate administration and filings with the courts, if needed.
Your dad has a final 1040 to file to report all income/expenses through date of death. The 1041 Estate/Trust Income Tax Return reports all income/deductions after date of death and until assets are fully distributed. A fiscal year election may be good here. Also, ask your CPA about a 645 election to combine the Estate/Trust into one entity for tax purposes.