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Financial Planning / Tax Strategies


Subject:  Re: Need tax consequences advice please Date:  1/29/2013  5:51 AM
Author:  TMFPMarti Number:  117575 of 127513

My parents had a Living Trust. After my mother's death, the estate was split, creating a Survivor's Trust and a Decedent's Trust. After my father's death, the estate was divided into two PATs. I have a Personal Asset Trust and so does my brother. The beneficiary(ies) I named will receive their own PAT from my estate after my death.

We start with the caveat that I'm not a lawyer.

I've never heard the term PAT, but it sounds like a plain old living trust, which is just a way of avoiding probate when you head for your dirt nap. During your life you control it and can do what you want with the assets in it. If that's what it is, it's disregarded for tax purposes, all payers should be using your SSN, the trust never should have had an EIN, and everything just gets reported on your return.

Here's why it's important you get this straightened out. If the IRS sees more than $600 of income reported under a trust's EIN it's going to be looking for a 1041 from the trust. How has income from the trust been handled in prior years, or is 2012 the first year of its existence?

If an attorney confirms that what I suspect is the case, let us know. It's pretty easy to fix the tax reporting side of things, and I think you could probably accomplish that without having to file a 1041.

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