My family set up a Revocable Trust for my parents several years ago. My mother passed away two years ago, and my father late last year. I understand that income the Trust earned before my father died gets transferred to his tax return. At his death, the Trust turns into an Irrevocable Trust and the Trust must file its own tax return for any income earned following. We generated a new tax ID for the Trust effective as of the date he died.
The 1099 forms for Trust income this year mostly have my father's SSN and the name of the original Trust. The Revocable Trust tax ID used was his SSN.
One 1099 form was issued to me, with income combined from the Trust and my personal accounts, since I am the Trustee. I think I can split this one as the different account numbers and amounts are noted on the 1099.
Now I'm trying to figure out how to account for all this when doing the tax forms. It looks like I can add a note on Schedule B that some of the interest belongs to a nominee. Then I need to issue new 1099 forms for the extra amounts and submit them to the IRS. I am both the Trustee and filer of my Dad's taxes, so I need to submit the forms to myself.
Is this the right way to do it, to choose the nominee adjustment and issue new 1099 forms naming the Irrevocable Trust as the recipient? There are quite a few accounts, and this seems very cumbersome. Is there a simpler way to do it? It looks like the forms can only be filled out on hardcopy and mailed in. Why do they make it so complicated? It sounds as if the IRS really wants to discourage doing it this way.
Since banks don't appear to be in the position to track interest before and after death for a Trust Grantor, it seems this would be a common situation. 1099 forms will normally be issued for the Revocable or Irrevocable Trust, depending on the account information on file at the time, but they don't appear to be capable of splitting the interest and issuing one 1099 for each Trust Revocable/Irrevocable. Anyone who dies with a Revocable Trust would be in this same situation. How is this normally handled?
Any help would be appreciated.
