Trust Return

[Jerry1]

Has anyone ever prepared a trust return? DW’s mother put her money in an irrevocable trust. The three daughters are the owners. The trust only earns interest but some years might have some fees, like legal fees. Last year a guy DW’s sister works with “gave them a deal” and did it for $500. I didn’t want to get involved because it was the first year and even though I did some taxes at the cpa firm, I never did a trust return. Now, it seems like the estimates to do the return are coming in over $500 even over $1,000.

Now I’m thinking I could get a turbo tax version that can do the return and should have little to no problem preparing the return. My only real concern is the type A sister and her wanting everything “now”. I’m so beyond being on the clock that “when is it going to be done” isn’t anything I want to deal with. Though I think my pace (slow) would cause her more stress than me putting up with her would create for me.

Any words of wisdom or concern from the group before I offer my services?

[Souschef]

I had a QTIP trust set up after my wife passed away. I filed a 1041 form and a 541 (CA) every year.
The issue is if the sisters get any of the trust income. In that case you will have to file K-1's with the 1041.
Here is a link:
https://www.irs.gov/forms-pubs/about...-k-1-form-1041

[Jerry1]

Quote:

Originally Posted by Souschef I had a QTIP trust set up after my wife passed away. I filed a 1041 form and a 541 (CA) every year. The issue is if the sisters get any of the trust income. In that case you will have to file K-1's with the 1041. Here is a link: https://www.irs.gov/forms-pubs/about...-k-1-form-1041

Correct, I’m expecting to have to issue K-1’s. My thinking is that is no big deal as long as I buy the right turbo tax software which will generate the K-1’s.

Thanks for reminding me that I need to look at whether I need to file anything for state. I’d think so.

[socca]

Irrevocable trusts don't have owners. They have one or more trustees and one or more beneficiaries. It sounds like the daughters are beneficiaries; it's not clear who the trustees are. The trustee(s) are responsible for managing the production of the trust tax returns (among many other duties).

Acting as a trustee I've been responsible for irrevocable trust tax returns for many years. Our tax preparer charges around $600 for the federal and two state tax returns.

If I wanted to do it myself, I would use H&R Block Premium & Business. The Business application supports the generation of federal and (I assume) applicable state trust tax returns.

I've never tried to prepare trust tax returns myself. Why not? Well, slap some value on my time and then calculate how much time would be required to produce the returns myself, and it's clear that paying someone else to do it is the better choice for me. One thing to consider: the hassle factor if the IRS doesn't like the returns you produce yourself.

Good luck!

[Poopycat]

I tried to do the trust taxes once I became trustee and I was so confused. My dad always had an accountant do the trust taxes so I kept up that tradition. And I don’t regret it.

I used to do my personal taxes with TurboTax but eventually decided after becoming the trustee to just have the accountant do mine too. Again, no regrets, even though it’s more expensive than doing it on my own.

[Jerry1]

Quote:

Originally Posted by socca Irrevocable trusts don't have owners. They have one or more trustees and one or more beneficiaries. It sounds like the daughters are beneficiaries; it's not clear who the trustees are. The trustee(s) are responsible for managing the production of the trust tax returns (among many other duties).

The daughters are the trustees. The mother gifted her worth to the daughters so they are the grantor and the trustee.

I’m not worried about the IRS. The return is simple. It only has interest income and basic expenses (professional fees - legal and tax). Being electronically filed, I can’t imagine they would select for audit based on who prepared the return. Either way, I would have all records and be able to support the return if questioned. Having someone else prepare the return doesn’t remove that responsibility from the client. It just gives you someone to hold your hand - for a fee.

If I’m concerned about anything, it is the look back provisions should her mother ever have to go on Medicaid.

[HarveyS]

I hate spending money on things I can do myself. However, in your shoes, I'd hire this out. Why? 1) it gets done on someone else's time frame, not yours. If sister #1 can be a PITA about this, better it is someone else's behind. 2) Any errors are someone else's issue (yes, for a fee). 3) You'll save money, but two thirds of the savings are for other people who may not care about the savings, and hold your feet to the fire over issues 1 & 2.

If it were me, for the sake of $300-500 (your 1/3 share), out-source this work.

[pb4uski]

Quote:

Originally Posted by Jerry1 ... Any words of wisdom or concern from the group before I offer my services?

I do my Dad's living trust return... DS, DM and I are co-trustees and DM is sole beneficiary.

I download the Form 1041 and Schedule K-1 from the IRS website and fill in, save and print the pdfs and mail it out. Cost = $0. All trust assets are at Vanguard and I get a 1099-DIV and 1099-B for the trust and that is it. I developed a spreadsheet that has inputs from the 1099s and output that follows the Form 1041 and Schedule K-1. Takes me an hour or so each year.

I like the idea of using TurboTax... if our trust was more complicated I would consider it.... but not worth $105 compared to $0... but in your case it'll be saving them a lot so it would be worth it.

[ncbill]

Both TurboTax Business and TaxCut Premium Business will do trust and estate (Form 1041) federal returns as well as generate K-1s.

I just bought the latter from newegg for under $40 w/ promo code (Turbotax Business is closer to $140) and for some reason it installed TaxCut Premium which includes one state & TaxCut Business (what you need for trust/estate returns) as two separate programs.

Neither of the above offers my state's trust/estate tax return form so I do that by hand...relatively easy.

So, no K-1s generated? (no distributions to the beneficiaries?)

[CardsFan]

Quote:

Originally Posted by HarveyS I hate spending money on things I can do myself. However, in your shoes, I'd hire this out. Why? 1) it gets done on someone else's time frame, not yours. If sister #1 can be a PITA about this, better it is someone else's behind. 2) Any errors are someone else's issue (yes, for a fee). 3) You'll save money, but two thirds of the savings are for other people who may not care about the savings, and hold your feet to the fire over issues 1 & 2. If it were me, for the sake of $300-500 (your 1/3 share), out-source this work.

^^ This. Particularly #3. No good deed goes unpunished.

[38Chevy454]

I do trust return for irrevocable trust that I am trustee and it is a pain. I don't spend the money for the extra TT. I just download the 1041 and state forms to paper file. I don't have any significant items, just 1099 and some expenses. No K-1 to generate.

[N02L84ER]

I am in this situation starting this year, so I am following the discussion.

[Jerry1]

Quote:

Originally Posted by pb4uski I do my Dad's living trust return... DS, DM and I are co-trustees and DM is sole beneficiary. I download the Form 1041 and Schedule K-1 from the IRS website and fill in, save and print the pdfs and mail it out. Cost = $0. All trust assets are at Vanguard and I get a 1099-DIV and 1099-B for the trust and that is it. I developed a spreadsheet that has inputs from the 1099s and output that follows the Form 1041 and Schedule K-1. Takes me an hour or so each year. I like the idea of using TurboTax... if our trust was more complicated I would consider it.... but not worth $105 compared to $0... but in your case it'll be saving them a lot so it would be worth it.

Thanks. Never thought of a downloadable form. I have the last return and could easily follow it to prepare this years return. I was just thinking that I should make it easy on myself and get TT especially so I could file electronically. However, I guess there's no reason to care since there's no refund or payment due on the 1041/K-1's. That's all handled by the individuals. If it sits at the IRS, I guess I don't really care.

Now I just have to get my mind around her type A sister (issue #3)

[pb4uski]

I think that one is easy. From what you wrote it sounds like the three sisters are co-trustees. Tell them that if they want to save a little money then you'll do the return and K-1's by the due date (April 15) and if any of them ever find that unacceptable that you will gleefully transfer the responsibility for preparing the trust return and K-1's to the person who is dissatisfied. That should shut her up.

But if their mom has died, why is the money still in the trust? Under the terms of my dad's trust mom became the sole beneficiary and when mom passes then the remaining co-trustees (DS and I) are charged with distributing the trust's assets.... ditto for mom's trust... so within a year or so of her passing then the trusts will have disributed the assets and will be done.

[Jerry1]

Mom has not passed. She's is in a memory care unit - Alzheimer's. The trust was set up to deal with Medicaid rules if it ever comes to that. Based on the gift, mom is now broke. The daughters will spend the money if needed on her care. The thought being that it would better to be able to supplement Medicaid if it comes to that rather than have mom be actually broke before Medicaid kicks in.

[pb4uski]

Got it. I have a dear aunt who is heading down a similar path I'm afraid. Fortunately, her husband, my personal hero and an unquestionably nominee for sainthood, is still alive and they live at home together.

[Jerry1]

I wish him all the best. It will likely test his mettle. We tried to have mom live with us, but she started walking away and we had to put her in a secured facility. It's a very rough disease to deal with.

[Montecfo]

I have done it and used TT which was kind of nice since I had not done one in a while. This was for an estate, same form 1041.

I will be doing one this season also.

[target2019]

Quote:

Originally Posted by Jerry1 Thanks. Never thought of a downloadable form. I have the last return and could easily follow it to prepare this years return. I was just thinking that I should make it easy on myself and get TT especially so I could file electronically. However, I guess there's no reason to care since there's no refund or payment due on the 1041/K-1's. That's all handled by the individuals. If it sits at the IRS, I guess I don't really care. Now I just have to get my mind around her type A sister (issue #3)

Issue #3, yes, that is familiar. Type A. The One in Charge. Never helps in a meaningful way. The Supervisor.

LOL, there's the rub!

[pb4uski]

I did my dad's trust return this morning on pdf forms. Only took a couple hours and what took the most time was figuring out that the 1099-DIV and 1099-B excluded one of four tickers in the account. I could clearly see the income and capital gain on the ticker that was sold in 2020 on the year end account statement but it wasn't on the 1099s.

Absent the time spent on that, about an hour soup to nuts.

Vanguard said the ticker was missing because the income was subject to revision... it's an international equities fund. I responded that it would be best that they don't provide shareholders incomplete 1099s.