Mportant Information About Your Revocable Living Trust Page 10

ADVERTISEMENT

W
A
W
H
& F
, P.C.
ADE
SH
OODS
ILL
ARLEY
total of the assets remaining in your name at the time of your death is $61,000 or less (in 2012; this amount is
indexed for inflation), and those assets do not include any real estate, then those assets can be transferred by
affidavit (any without any proceedings in probate court). As a result, you may want to keep some of your
tangible personal property outside of the trust. However, we recommend that any tangible personal property
having a significant value (for example, valuable jewelry, art works, or collections) be transferred to the trust.
PART II--TAX MATTERS
Income Taxes
After you transfer your assets to your revocable living trust, the trust will be the legal owner of the assets.
However, for income tax purposes, the trust is not treated as a separate taxpayer while you are alive and retain
the right to revoke or change the trust.
The current IRS regulations provide that, during your life, the trust should not file any kind of income tax return.
No income should be reported in the name of the trust. Instead, the income earned by any assets titled in the
name of the trust will continue to be reported by you, individually. Your social security number should be
reported as the tax identification number for the trust. If you are married, you may continue to file joint income
tax returns with your husband or wife, and report the trust income on that joint return, just as you have probably
been doing in the past.
If, during your lifetime, you cease to serve as one of the trustees of the trust, for whatever reason, then the
income will still be reported on your return and under your social security number. The trustee is required to
provide you with a list of income earned and deductions paid.
At your death, the trust will become irrevocable, and will thereafter be treated as a separate taxpayer for income
tax purposes, unless it elects to be treated as part of the estate for income tax purposes. If the trust makes that
election, income earned by the trust will be reported on the fiduciary income tax return filed by the estate. The
trust will not need to obtain its own tax identification number, and file trust fiduciary income tax returns on IRS
form 1041, until the later of two years after the date of death, or six months after the federal estate tax is finally
determined. At that time, a new taxpayer identification number will have to be obtained for the trust. We
generally recommend that an accountant be retained by the successor trustee to prepare income tax returns for
the trust and the estate.
If you or your accountant have any questions about how to report income from assets held by the trust, please
feel free to contact us.
10

ADVERTISEMENT

00 votes

Related Articles

Related forms

Related Categories

Parent category: Legal
Go
Page of 10