Having trouble understanding if I can make my mother in laws trust a QRT

[john14verse6]

I read this:

"(QRT) is any trust (or part of a trust) that, on the day the decedent died, was treated as owned by the decedent under section 676 by reason of a power to revoke that was exercisable by the decedent"

My mother in law died July 2 2024 at 8:14 PM.  She had a revocable trust......and my understanding of a revocable trust is that it can be revoked at time before the trustee dies. But she was not conscious in the hours before she died on July 2nd so technically she could not have canceled the trust while she was alive because she wasn't conscious.  I read section 676 to try and clarify things, but that only confused me more.

Question......can I make this a QRT and if so, when is my deadline to make the election? If I cant, why not?

[DavidD66]

You don't make it a QRT.  It either is or it isn't.  Based on the limited information you provided, it sounds like the trust is a QRT and would be eligible for a Section 645 election.  Most revocable living trust (RLTs) are qualified revocable trusts (QRTs) because the grantor retained the right to revoke the trust.  If you have both a QRT and probate estate, a section 645 election would allow the trustee and the executor to combine the QRT and the estate into a single tax return, filed as an estate.  If there is no separate probate estate, the election will allow you to file the trust return as though the trust were an estate (as opposed to a trust return). 

Note that a Section 645 election is only valid for two years. 

[john14verse6]

There is not a separate probate estate, only the trust.  The trust contains her home, a couple of old cars, some real estate worth about $5,000 and her checking account.  She didn't have any investments.

So it sounds like due to the simplicity of this trust, filing the QRT form really wont do much in this instance.  I just need to do a 1041 for 2024 showing that she made about $100 in interest and paid some property taxes. Then when we sell the house this year, we will have to report the gain on the sale of the house on our 2025 1041 form.  Am i getting that correct?

[RobertB4444]

That all sounds correct, yes.  Except that you don't have to file a trust or estate tax return unless it earns at least $600.  So you may just want to skip the 1041 for 2024 unless there is a nice big loss from expenses that you want to use in 2025 or distribute to the beneficiaries to take on their personal tax returns.

@john14verse6 

[john14verse6]

Thank you Rober B !

I had read about the $600 limit, but when we filed to get an EIN number from the IRS, they sent us form SS-4 and it had this statement on it:

After I saw that, I assumed I had to file regardless of the income limit.

[RobertB4444]

No, the 1041 is required from your trust if you meet the filing requirements.  Which you don't with only $100 in income.  Although the sale of the house next year will definitely qualify.  

@john14verse6