My father passed away recently. I have discussed this in another topic. He has 2 banks accounts (a checking and savings) in his Trust’s name. They under his Social Security number because before he died the Trust was Revokable but now that he has passed way it is Irrevocable. I am supposed to meet with his lawyer today. He is creating SubTrusts for 2 of the Beneficiaries. He is going to give me 3 new Tax ID’s, one Tax ID is to replace his Social Security number for his main Trust bank accounts, and Tax ID’s for the 2 new SubTrusts. As far as the main Trust I am not sure if the bank will keep the same account numbers for the checking and savings accounts now that his Social Number will no longer used or if the bank will create 2 new account numbers for the new Tax ID. My guess is the later. As far as opening up new SubTrust bank accounts, I want to be sure that when I move money from the Trust bank accounts to the SubTrust bank accounts for the beneficiaries that nothing is done wrong so that it will be a Red Flag to the IRS and they will try to tax it as income. To prevent this can this movement of money be accounted for on 1041 forms for the main Trust or SubTrusts so the IRS won’t try to tax it? If not, how would they know not to?
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I'm not sure if you have other questions or issues, but merely moving corpus (principal) would not be considered to be an event that would require reporting on a 1041.
You should discuss this situation with your legal counsel because the mechanics can be complex and the exact result will depend upon the language in the trust provisions.
There is no way to put money transfers on a 1041. The bank should not be sending anything to the IRS about transfer like this. ask the lawyer or better yet call the bank to verify.
I guess my question is more for an accountant. If there is a bank account for the Trust and another bank account for the SubTrust and both have different EIN’s, if a large chunk of money (about $130,000) is moved from the Trust account to the SubTrust account doesn’t the IRS want to know when a lot of money is moved even though it’s not taxable because the IRS might think it is income even though it is not? Usually tax forms are mechanisms to explain things to the IRS.
Not a taxable event until a distribution is made.
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