topic Re: IRS Form 56 for Sub Trust Question in Get your taxes done using TurboTax

IRS Form 56 for Sub Trust Question

trust812 — Thu, 06 Feb 2025 22:45:30 GMT

Separate Form 56s need to be filled out for file my father’s final 1040 and Initial Trust 1041 which will be filed for the 2024 tax year. I am both the Executor and Trustee and filings were done by my late father’s Estate lawyer with a county in Florida. For the Trust it looks like for “Section A. Authority” “valid trust instruments and amendments” would be checked and “Part III Court and Administrative Proceedings” be filled out with the court information.

Under the main Trust my father’s lawyer also established Sub Trusts for 2 of the Beneficiaries, however both of these didn’t need to be filed with the court. Instead my father’s Estate lawyer just had me notarize notices of 2 Sub Trusts his firm drafted up and his law firm is holding a copy as well as giving me one. For both Sub Trusts 1041 Trust Tax Returns don’t have to be file for Tax Year 1024 because there is no income for each but for 2025 I anticipate 1041 tax returns would need to be filed for both because there will be Inherited IRA distributions and K-1’s will be generated. My question, since the Sub Trusts didn’t have any court proceedings rather than checking “valid trusts and instruments” under “Section A. Authority”, the “Other” box be checked and write something in the blank space like “The Jane Doe Sub Trust established by the John Smith Trust by the court on 10/15/2024 and leave Part III blank since there were actually no court proceedings for the Sub Trusts? I suppose another alternative for Part III is that the court proceedings information from the main Trust can be filled in as was done for the main Trust.

Last year shortly after my father died I questioned my father’s Estate lawyer when he suggested that 2 Sub Trusts needed to be established. To me they seem to make things more complicated with more tax returns. I thought maybe his lawyer was trying to make more money. When I asked him why can’t I just keep good accounting records for the 2 Beneficiaries he explained to me that the Sub Trusts are for 2 special situations and it’s cleaner this way and will protect me better as a Trustee. I have since read on the internet that some Estate lawyers recommend sub trusts and others say that they aren’t needed.

Re: IRS Form 56 for Sub Trust Question

M-MTax — Thu, 06 Feb 2025 22:59:36 GMT

Whether the sub-trusts needed to be created would be a matter of the terms of the main trust or any will.

Since you were named trustee under a valid instrument, you can check, “valid trust instruments and amendments". This is not really material in any event.

Both points are valid, though, as far as creating the sub-trusts are concerned; they increase expenses, time involved, and paperwork, but they do provide protection.

Re: IRS Form 56 for Sub Trust Question

trust812 — Fri, 07 Feb 2025 00:22:25 GMT

OK, thanks! But because when my father’s Trust lawyer created the 2 Sub Trusts there were just notices of Sub Trusts notarized but no actual court proceedings for them in your opinion should Part III be filled out with the court proceedings information for the main Trust or just left blank?

Re: IRS Form 56 for Sub Trust Question

M-MTax — Fri, 07 Feb 2025 01:41:41 GMT

You can have a valid and enforceable trust without court proceedings.

Re: IRS Form 56 for Sub Trust Question

trust812 — Fri, 07 Feb 2025 05:10:50 GMT

OK, so I guess what you are saying is it doesn’t matter and it probably shouldn’t be filled in since there weren’t court proceedings for the Sub Trusts.

Re: IRS Form 56 for Sub Trust Question

M-MTax — Fri, 07 Feb 2025 05:36:15 GMT

Not exactly. You would file a Form 56 each time you create or terminate a fiduciary relationship.

Re: IRS Form 56 for Sub Trust Question

trust812 — Fri, 07 Feb 2025 09:34:25 GMT

I think you misunderstood me. I wasn’t saying it shouldn’t be filed for the Sub Trusts. What I am saying is Part III doesn’t need to be FILLED in because there was no court proceeding for the Sub Trusts. I think you thought I meant not FILED.

Re: IRS Form 56 for Sub Trust Question

M-MTax — Fri, 07 Feb 2025 14:05:04 GMT

You are correct.