Living trust filing question

[SCHUETZ1619]

I am the successor trustee for a taxpayer with a living trust who died in mid-December after receiving all income for the year. 

(1) Do I file a 1040 or 1041? (A paid tax preparer prepared a 1040, but I'm not secure that this is correct.)

(2) Do I use the taxpayer's SS# or the EIN for the trust, received after taxpayer's death?

(3) If I'm filing a 1040, how do I show the IRS that I am the trustee and have the right to sign the return?

Thank you.

[Anonymous_]

A final 1040 needs to be filed for the decedent (which apparently has already been done).

The trust will need an EIN.

See https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-n...

As successor trustee, you should file Form 56.

See https://www.irs.gov/instructions/i56

[SCHUETZ1619]

Thank you so much. May I ask one more?

There will be no court-appointed personal representative as there will be no probate (trust).  I have signed the return and indicated that I am the successor trustee. Is this correct? There is a refund due. Does this require further action on my part?  Thank you again.

[Anonymous_]

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@SCHUETZ1619 wrote:

.....I have signed the return and indicated that I am the successor trustee. Is this correct? There is a refund due. Does this require further action on my part? 

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You might want to consult with a local tax professional.

However, assuming you are referring to the final 1040, you need to file a Form 1310 to claim a refund on behalf of the decedent. Further, you should sign that return with your name as "personal representative".

[SCHUETZ1619]

I understand, but that's part of the problem. 

The instructions to form 1310 read: "For purposes of this form [1310] , a personal representative is the executor or administrator of the decedent’s estate, as appointed or certified by the court."

Such a court order is issued pursuant to probate.  But there is to be no probate as the entire estate is within a living trust, of which I'm the successor trustee.  The 2021 return will be in the name of the trust. Catch 22.

Could I leave the money with the IRS to be applied to 2021 taxes? Or is there a problem with this because the refund is in the name of the decedent (filed under SS #) and the return will be in the name of the trust (filed under an EIN)? 

This must be a common issue, but I can find nothing that addresses it.  Thanks for any help you can provide.

[SCHUETZ1619]

I forgot to mention that I'm on the forum because the local tax professional provided the completed return without the 1310 and said all is well as is. I questioned this.

I am in Oregon and the decedent and tax professional are in CA. 

[JeffreyR77]

Please clarify if the decedent's Form 1040 was efiled or mailed 

The tax professional's interpretation of "all is well" may be that the return was accepted by the Modernized eFile (MEF) system and acknowledge. 

Another question for the tax professional is was the refund set for a direct deposit or not.  You should know where to expect the refund to be able to assess for yourself if "all is well".   

Refunds are normally issued within 21 days for efiled returns.   

As the decedent passed before year-end, there is a requirement for a Form 1041 to be filed for 2020. 

You are correct that the refund for the decedent cannot be applied to the trust as the trust is a separate entity.

[SCHUETZ1619]

Thank you so much for the response. The return (not yet mailed) is being filed on paper.  The tax professional said that only a 1040 was needed for 2020 because all 2020 income was received prior to the decedent's death on December 11.  Is your understanding different? 

Might I return to the refund problem? Because there is no need for estate probate due to the trust, there is no court-appointed personal representative, but the IRS will issue the refund only to a court-appointed personal representative (form 1310). CATCH 22.  

Surely this is a common situation. How is it usually solved?

I see on the 1040 that I can enter bank information for direct deposit to the decedent's bank account. This would be ideal, but how would the IRS know that the given account is actually the decedent's?

I don't want to abandon the refund, but it appears there may be no other choice. Any counsel would be most appreciated. Thank you.

[Anonymous_]

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@SCHUETZ1619 wrote:

I understand, but that's part of the problem. 

The instructions to form 1310 read: "For purposes of this form [1310] , a personal representative is the executor or administrator of the decedent’s estate, as appointed or certified by the court."

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You do not need to be appointed or certified by a court if you are the proper party to file the decedent's final return; you merely need to be the personal representative.

You are the personal representative if you are an executor, administrator, or are otherwise in charge of the decedent's property. 

See https://www.irs.gov/publications/p559#en_US_2020_publink100099488

[Anonymous_]

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@SCHUETZ1619 wrote:

Surely this is a common situation. How is it usually solved?

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You file Form 1310 and then the refund check will be made payable to you, the personal representative.

[SCHUETZ1619]

Form 1310 was where I started this journey. You're right -- except that the 1310 requires that the personal representative submit the court order of appointment as personal representative. The will alone is not acceptable. This requires costly probate, the avoidance of which was the purpose of the trust in the first place.

The reason I'm on this forum is to find a way out of this circular maze. I can't believe that the only way out—without probate—is to abandon the refund. But maybe it is.

[SCHUETZ1619]

I've just reread the 1310 and realize that I have misunderstood it through dozens of readings. The problem was a double negative that I keep misreading. Thanks to all who have attempted to set me straight.

[scarman59]

I'm in the same conundrum as you this year as my mother passed in December 2021. I've been searching for the same answer as you so seeing as how you had this issue last year I'm hoping you can tell me how it resolved. Was the Form 1310 not needed or if it was sent was the return accepted and refund given without the need of "Court appointed letter or certificate? 

Thanks in advance.

[SCHUETZ1619]

I did get it solved and received the refund check without issue. Here's what worked for me:

At the top or the return, form 1040, p. 1, I entered by hand, "[name] Deceased [date]."

I used only the SS# on the 1040--no EIN. Before filing, I applied for and received an EIN for the trust. I later learned that the EIN would only apply to a return in the name of the trust—in my case, the 2021 return. 

I  filed a 1310 with the return. In parts I and II, I stated that there WAS a will, and that a court had NOT appointed a pers. rep., and would NOT be appointing one. (This was the key.)

Before filing the return I sent in a form 56 and noted on the return that I had done so. You could just send it in with the return, however. In section A, I indicated "e" (Valid trust instrument and amendments.) On line 2b, I entered the date of death.

Every time a signature was required I appended "successor trustee."

That was it. I hope this helps.

[MRKJ]

It is 2022 and I came here for the EXACT same reason.  Filing a 1031 with me as successor trustee but no recourse for the trust EIN to be granted the refund.