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Julie Garber

Tax Day is Looming, So Do You Need File IRS Form 1041 for Your Revocable Living Trust?

By April 9, 2013

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It's that time of the year again - time for me to write about taxpayer identification numbers and income tax returns for revocable living trusts. In general, you will not need to file IRS Form 1041, U.S. Income Tax Return for Estates and Trusts, for your revocable living trust as long as you are alive and well and serving as the sole Trustee or as a Co-Trustee of the trust. This is because under these circumstances the taxpayer identification number that will be used for your revocable living trust will be your very own Social Security Number, and so all interest, dividends and other income earned by the assets held in your trust will be reported to the IRS under your very own Social Security Number. Therefore, all income earned by your revocable living trust will be reported on your very own IRS Form 1040, not on a separate Form 1041.

There are, however, a few circumstances where a separate taxpayer identification number may be required for your revocable living trust and Form 1041 will then need to be filed:

  1. If you become mentally incapacitated, then your Disability Trustee may need to obtain a separate taxpayer identification number, called an "Employer Identification Number," or "EIN" for short, for your revocable living trust. This will generally depend on the exact circumstances of your incapacity and who you have named to serve as your Disability Trustee (for example, your spouse vs. someone else). In some cases your 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, it will be necessary to obtain an EIN for your revocable living trust. If this is the case, then your Disability Trustee may 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, which means April 15, 2013, for the 2012 tax year. Your Disability Trustee should consult with an attorney or accountant to determine if Form 1041 needs to be filed for your revocable living trust.

  2. If you are competent but not serving as a Trustee of your revocable living trust, then as with the Disability Trustee above, your Trustee may need to obtain an EIN for your revocable living trust. This will generally depend on your individual circumstances and who you have named to serve as your Trustee (for example, your spouse vs. a bank or trust company). In some cases your 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, it will be necessary to obtain an EIN for your revocable living trust. If this is the case, then your Trustee may 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, which means April 15, 2013, for the 2012 tax year. Your Trustee should consult with an attorney or accountant to determine if Form 1041 needs to be filed for your revocable living trust.

  3. A question posted a while ago in the Wills & Estate Planning Forum leads to another reason why a Form 1041 may need to be filed for your revocable living trust - sometimes your estate planning attorney may determine that it will be in your best interest for you to obtain a separate taxpayer identification number for your revocable living trust and report all income earned by the trust on Form 1041: Revocable living trust with EIN.

If a taxpayer identification number is needed for your revocable living trust, one can be obtained online by using the IRS's EIN Assistant.

Comments
April 15, 2013 at 5:49 pm
(1) Cyborg1939 says:

What about Irrevocable trusts , e.g. QPRTs?

April 16, 2013 at 2:27 pm
(2) Lilah says:

These are great tax tips since it’s always good to have your ducks in a row come tax time!

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