maglib
Level 10

1041 for Trust after death became irrevocable K-1's Many questions

I'm new at this so please be kind.  If you can answer any portion of all my questions please comment as over 45 people looked already and no @experts have responded. I am the Trustee but, not a beneficiary of the following:

 

My aunt had a Revocable Trust established in 2017 , she passed away in 4/2023. I filed her personal tax return for all income already and she owes no taxes.

 

I got a EIN number and all assets of the Trusts including her home were transferred to the new irrevocable Trust. The home was sold in 2023.

 

The beneficiaries are 45%, 10%, 15%, 15%, 15% originally.

 

-the 45% and the 10% beneficiaries withdrew majority of their principal in  12/2023 other than some remaining for expenses for taxes and other costs of the estate and some future maturing bonds so they now own only a small portion of remaining assets. They had no interest in keeping it under Trust protection and Trustee (me) had full flexibility and they did not want to listen to my tax advice...

 

-we want the TRUST to pay all taxes and expenses or to pick and choose as there is complete flexibility to the Trustee on distributions which makes it complex.

 

-The plan is for the Trust to continue in perpetuity for the three beneficiaries who are 15% each which once all accounting is done, they will have 33.33% each as the 45 and 10% beneficiaries signed their rights and took almost all their distributions. there will be a final distribution in 2024 for the original 45% and 10% owners once we know the final bills and debts of the Trust and some tbills matured.

 

1.  It appears that I can't deduct costs of her funeral and other expenses incurred by the trust.  I have costs related to property maintenance, funeral, attorney, insurance, maintenance, supplies, home repairs, lots of mileage that were costs of the Trust upon her death.  I see no place in TT to enter these. Is it true?

 

2. There is a home that was in the trust. As it sat for a few months after death before sale, there is a loss due to expenses to maintain and drop in mkt value although short term. I do not believe home sales can show losses as it was immediately put up for sale but, sat for months needing maintenance. Correct? Or as it went into the Irrevocable trust upon death does something change about the status of the home investment? No 1099-S was received.

 

3.  When I enter the 1041 I assume this is a complex Trust as the choice as the Trust became Irrevocable at death and the Trustee has many powers on what is or isnt distributed.

 

4.  Is the date the entity created her date of death or is it when the revocable trust was created? I'm assuming DofD as that is when the ein was needed and it became it's own legal entity.  Or is it 2017 when she originally created the Trust as that is what the Trust title for the EIN still says?

 

5. I as trustee is doing this for free but, I do have expenses.  I did hire though a portfolio manager and attorney so I assume those can be entered as fiduciary fees.  Since all investments were taxable, I assume they all go toward taxable income?   Can any other investment expenses be entered like my costs of driving and hiring portfolio manager, and supplies, software, etc or TT is saying no as TCA took them all away. i had always thought Trusts could still deduct all these as they were entities. 

 

6. When TT asks about distributions, if I put in the $ amounts distributed it messes up the K-1 as it allocates based on amount distributed as TT has no way to say a distribution was 100% principal as the income is all taxed to the Trust.  The TRUST is supposed to be the one paying all the taxes.  Example let's say the Trust was 500k of principal, 3k interest, 4k dividends, and a capital loss of $5k du to fiduciary fees, legal.   Yet the 45% person took $200k out, and the 10% person took 43k out  leaving about $220k left in the trust of which $20k is reserves for unknown debts.  In 2024 there will be income to the trust and principal distributions to those people too  The k-1 and distributions entries has me perplexed.

 

7. How should the k-1's look as if I put the $ distributed in they get messed up as overallocations and person should not owe taxes on the funds.  How do you let TT know that the distributions are all principal?

 

 

Figuring once I get through year 1 this should not be so bad.  The beneficiaries are all over me about getting them their k-1's and filing the 1041 ASAP although i have been in/out of hospital.

 

Any help would be greatly appreciated.

 

**I don't work for TT. Just trying to help. All the best.
***Say "Thanks" by marking as BEST ANSWER and clicking the thumb icon in a post and that I solved your question
**Mark the post that answers your question by clicking on "Mark as Best Answer"
I am NOT an expert and you should confirm with a tax expert.