Legal Question in Wills and Trusts in New Jersey

Re: What are actions of Trustee of Living Trust upon death of grantor?

1. No tax ID required for a revocable trust

2. A tax ID will be required for a federal estate tax form 706 to be filed.

3. If the income passes to the surviving spouse and is taxable (a CPA question) it will result in a K-1 schedule to the income tax return.

Please note a change in my e-mail address [email protected]

Re: What are actions of Trustee of Living Trust upon death of grantor?

To answer your question's issues, in the order raised:

1. yes, use form SS-4, done ASAP.

2. yes.

3. yes; use a k-1

Re: What are actions of Trustee of Living Trust upon death of grantor?

Generally, Living Trusts do not require a Tax I.D. #. The trust account can use the grantor's Social Security number. At the grantor's death, a Tax I.D. # can be obtained easily from the IRS using IRS Form SS-4.

The estate will need a Tax I.D.# only if there will be assets in the name of the estate which generate income. Based on your comments, the estate probably does not need a Tax I.D. #.

When the trust becomes irrevocable on the grantor's death, the trust will file an annual income tax return (form 1041). Income paid to the spouse (and any other beneficiary for that matter) will be shown on a Trust form K-1 and included as income on the beneficiaries return (and taxed at that beneficiaries tax rate). Generally, trust income not distributed to beneficiaries is taxed to the trust.

If you have further questions, I can be reached at 908-273-1212.

Re: What are actions of Trustee of Living Trust upon death of grantor?

You have not indicated if the living trust is revocable or irrevocable, and/or f it is considered a "grantor" trust. If the trust is a revocable "grantor" trust, no tax ID number is required at this time, as all income is considered as being taxable to the grantor, even if there is a trust registration for the assets and no separate trust return is required. In the traditional creation of a trust, other than a "grantor" trust, the tax ID number is obtained from IRS (using Form SS-4, obtainable from any IRS office or the internet) and the trust accounts (bank, brokerage, etc.) will show this in a trust return (Form 1041). If the trust is irrevocable, the tax ID number should be obtained immediately, as a trust return is required to be filed. Since there will be no "probate" estate (passing under a Will), there is no need for a tax ID number for the estate when each grantor passes away. If the trust is a "grantor" trust and both spouses are grantors, the survivor continues to report the income as if earned by the survivor on his/her personal return (Form 1040) as if there were no trust. To be precise, I suggest always obtaining a tax ID number for the trust, file the return (Form 1041) as a grantor trust and report the pass-through on Schedule K-1.

I believe that some possible benefits are being lost if the trust is merely a "grantor" revocable trust and would suggest you call me (973)-377-3313 to discuss the advantages and benefits from having an irrevocable living trust (such as asset protection, protecting the lifetime exclusion if the trust were to grow beyond today's $675,000 exclusion, and possible medicaid benefits).

Walter

Re: What are actions of Trustee of Living Trust upon death of grantor?

You should obtain a Tax ID by filing form SS-4. THis will keep the income and the assets reported separately from the IRS. Secondly, you should obtain legal help in funding the trust. If the assets are typically in joint names, the trust might not be appropriately funded.

Ronald J. Cappuccio

856 665-2121