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Author: csm1rr Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121258  
Subject: Re: Need tax consequences advice please Date: 1/28/2013 3:19 PM
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RE:What's the nature of this/these trust(s)? I ask because of the special emphasis you put on the word plus your desire to do your own taxes. If we're talking about a grantor trust that just retitles your assets it's disregarded for tax purposes, all 1099's are issued in your SSN, and all income is reported on your 1040.

If we're talking about a separate legal entity we're talking about a 1041 trust income tax return, and IMO that means we're talking about a professional preparer regardless of what the trust owns.

Phil
Rule Your Retirement Home Fool


First of all, Thank you Phil and op456op for your replies. Good thing y'all mentioned replying to my earlier post because it never showed up in my feed under My Boards. Thinking no one replied. I tried again as a new post. I did manage to backtrack to that thread and retrieve the replies posted. I do appreciate the answers!

To answer your question, I am not totally clear about it. I do have an EIN for this trust and I'm pretty sure that the earnings of both of these accounts will be reported under the EIN instead of my SS number. The 1099s for either account has come yet but I'm hoping they will arrive soon. Both of these accounts are labelled (Using my full name) Trust. I have not heard any of the lawyers call this entity as a 1041 trust. As I understand it, this was the legal way for my parents to pass on their assets to my brother and I after they both died. My brother also has a trust account with a different EIN from mine at both locations. Does this information help identify the type of trust I have?

Also, the lawyers have said that as long as I take out the trust's earnings and report it as income on my personal income taxes that I do not have to file a trust tax return. I am to use the trust earnings income for my health, education, recreation, and welfare. I can also use some of it to pay the taxes. Does that info help identify the type of trust? The trust is NOT part of an IRA.

My parents held stocks in the Merrill Lynch account and mutual funds at Fidelity to keep their booking simple. Plus they definitely believed in not putting all their eggs in one basket. (Or banking / investment service.) Their account at each place was split into two and that is how we each have a trust account at both places.

New questions:

I know that banks have FDIC insurance up to a certain limit and that investment accounts are NOT protected by FDIC and I do understand that investment accounts do at times lose money, especially when the whole stock market goes down.

Is there any entity that regulates how much money is allowed to be in an investment account? To any certain limit for any reason?

Is there any particular reason(s) to NOT have mutual funds, ETFs, maybe an open fund REIT and stocks all in the same account?

I am considering to open a trust account at Vanguard if it will save on costs in the long run for anything I buy from Vanguard.

I do have a PMA account at Wells Fargo. If I chose to have a Wells Trade account like I have seen mentioned on the discussion boards here, would there be any advantage to having such account in my own name and SS number instead of in the trust name and EIN?

Or should I keep all my investment accounts only in the trust with the EIN because that is what I have now?

Also, any thoughts or guidelines on how much percent of my money should I put into the 2 Vanguard ETFs, how much into the one Vanguard REIT that is open ended, how much into individual stocks and how much into mutual funds?

As for mutual funds, if I use balanced funds, will that be a good way to have exposure to bonds if that ends up being my only exposure to bonds in the whole portfolio of investments?

I see now that I should stay clear of the closed end funds. My main interest was the TAX FREE income. I know to not put them into my Roth IRA. Is there any type of "TAX FREE earnings" investments that I should consider putting into my investment portfolio that would NOT complicate the tax paperwork?

I do appreciate your informative replies! I know that I have more investing homework to do. Your answers are helping to steer me while I do this investing homework.

Thank you,
Carolyn
(not Caroline, I am Carolyn)
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