Hello - I have read several posts related to Irrevocable Trusts and the IRS instructions for Form 1041.
Needless to say, the IRS language is a little unclear and many of our T-T community posts vary depending on their respective circumstances.
I would hope our situation perhaps may be a little straight forward but wanted to make sure I understand the nuisances (if any). So, here it goes.
- Trust agreement made, executed & entered into by my mother-in-law titled "The (her name) Irrevocable Trust" as the Trustor (term is same legal meaning as the Grantor, Settler, Trustmaker referring to the maker of a trust) executed on 1/04/2023.
- Myself and my wife (her daughter) are entered as the Co-Trustees.
- Schedule A of Trust only includes her property (condo residence) and one brokerage account (i.e. stocks, mutual funds, etc.), where these assets are also referred to as the Trust Estate within the Trust document of which we have power over.
- The brokerage statements are mailed to my address since my mother-in-law is ill:
"Her Name" Irrevocable TR
U/A DTD 01/04/2023
My name and wife's name TTEE
Our address
Now my questions and hope I am asking the right things:
- Her brokerage 1099's I would expect will be sent to us from the brokerage firm but will any of the accounts DIV, INT, gains/losses still fall under the responsibility of my mother-in-law's for tax reporting purposes or will it be paid to us?
- Is this trust considered a living trust even though it is not specially called that in the document title (also to note, my mother-in-law's Irrevocable Trust is in force until her death and then transfers into a Revocable Living Trust under my and wife's name)?
- Does a 1041 need to be filed by my mother-in-law (note no Trust assets were distributed amongst the beneficiaries named within the Trust document, and she is still alive)?
- Do I need to file a 1041 for any reason since I'm a Co-Trustee?
- If no filing of a 1041 is required by anyone, the IRS instructions note something about Optional Methods 1 or 2 may be used, but this is very confusing language. Does this apply in our case (since nothing has happened during the year other than executing the aforementioned Trust document)?
- Basically, do we go about our normal tax reporting business if nothing has transpired in 2023 other than creating the Trust document (i.e. my mother-in-law files her 1040-SR and myself and wife file our 1040 for the 2023 income tax year)?
- Respectively does the same thing apply for the state of Illinois tax reporting?
