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Julie Garber

Do You Have to File a Separate Income Tax Return, Form 1041, for Your Revocable Trust?

By April 13, 2010

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This is a blog topic that I wrote about last year around tax time that is really worth reposting again this week.

In general the answer to this question is NO, as long as you're alive and well and serving as the sole Trustee or as a Co-Trustee of your Revocable Living Trust, you will not need to file a separate income tax return, IRS Form 1041, U.S. Income Tax Return for Estates and Trusts, for your trust. This is because under these circumstances the "taxpayer identification number" used for your Revocable Living Trust will be your very own Social Security Number. Thus, all interest and dividends earned by the assets held in your Revocable Living Trust will be reported to the IRS under your Social Security Number, and so the trust's income will be reported on your very own Form 1040, not on a Form 1041.

But this may change under at least two different circumstances:

  1. If you become mentally incapacitated, then your Disability Trustee may need to obtain an "Employer Identification Number," or EIN, for your Revocable Living Trust. Depending on the exact circumstances and who you've named to serve as your Disability Trustee (for example, your spouse vs. someone else), the Disability Trustee may determine that in order to fulfill his or her fiduciary duties and limit his or her own personal liability for paying your income tax bills that it will be necessary to obtain an EIN for your trust. This can be done on the IRS's website by filling out Form SS-4 using EIN Assistant. Your Disability Trustee will then be required to file a separate income tax return for your Revocable Living Trust on Form 1041 which will be due on the same date as your personal Form 1040.

  2. A question posted recently in the Wills & Estate Planning Forum leads to the second reason - sometimes your estate planning attorney may determine that it will be in your best interest for you to obtain an EIN for your Revocable Living Trust and report the trust's income on Form 1041. This is common when a joint trust is created by a husband and wife, as the question from the Forum demonstrates: Revocable Living Trust with EIN.
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