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-schedule-k-1-form-1041

 

[Jerry1]

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-schedule-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]

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]

... 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]

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]

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]

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.

 

[Texas Proud]

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?)

Hmmm, did not know the later did 1041s... spent the money on the expensive one... but will probably distribute all the money this year so only one more year to go...

 

[cathy63]

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.

Wow! If they issued it just to say they complied with the IRS' deadline, they should at least tell you that it's not complete. I have one 1099 (obviously not from Vanguard) which says right on the cover page "THIS IS NOT FINAL TAX INFORMATION. You have income from securities where final tax information is not currently available ... you should wait to file your tax return until the updated information is provided to you ..." This particular account has a REIT and usually by the end of March there's a corrected 1099. The total income doesn't change, but they do reallocate how much is long vs short.

 

[pb4uski]

No, nothing like that. What flagged it for me is that one of the tickers that I sold had a significant capital gain and the other had a close to equal capital loss... when I first did my return spreadsheet based on the incomplete 1099 if showed a significant capital gain and I thought to myself... I remember it as pretty much a wash... which caused me to check into it further.

Absent that, I might well have finalized the return and filed it. The 1099s didn't have any warnings like yours did.

My faith in Vanguard had been slowly declining (along with my account balances as I have moved things elsewhere)... this is another step down.

Comparing the 1099-DIV and 1099-B to the account statement for 2020, the
1099s are missing $xxx.xx of dividend income and $xx,xxx.xx of LTCG
relating to FTSE All World ex-US Adm yyyy-yyyyyyyyyyy.

How can this be? Very disappointing. Vanguard's execution is slipping.

I believe that you need to issue revised 1099-DIV and 1099-B for this
account.

Please call me at zzz zzz zzzz to discuss.

pb4uski, Co-Trustee

Hi pb4uski,

I am responding on behalf of [rep] who is out of the office today.

This is one of a few Vanguard funds with income reallocations. As a result,
you will receive another delivery of the applicable information in mid
February.

Thank you. So does this mean
that I will ultimately receive revised 1099-DIV and 1099-B for this
account? Or will I receive a 1099-DIV and 1099-B for just FTSE All World
Ex-US Adm which is currently missing?

Please relay to the powers that be that it is stupid that Vanguard would
issue 1099-DIV and 1099-B that are incomplete... if it is incomplete then
don't issue the tax forms at all. I could have easily relied on the 1099s
provided by Vanguard and filed the trust's tax return and would have had to
amend it and the K-1s to the beneficiaries... and I would not have been a
happy Vanguard customer.

You are certainly welcome. I understand and will certainly pass it along.

You should expect to receive complete and whole 1099s with all information
including the discussed additions from the missing fund from this first
release.

 

[BeanCounter62]

I also download the fill-in PDF forms for a Trust.

I have a Charitable Remainder Trust. In 3 of the first 5 years, we hired 2 different CPAs to do the return. Then I took over doing it myself by following how it was done the previous years (and I also found an error by the CPA!) The cost (20 years ago!) was $350, which included their needing to purchase specific software since the 5227 form is not in any basic tax program.

I've created an Excel Spreadsheet to enter the details for the trust (income & expenses) and it sorts out the K-1 and 5227/1041 details by line so that I can just type it into the tax form, save & print.

Doesn't take more than an hour each year. Slightly tedious typing it into the downloaded form, but lots cheaper than hiring someone who may or may not really understand CRTs.