Returns for an Irrevocable Trust

#4 12-12-2005, 05:23 AM

kamlet[at]panix.com (Arthur Kamlet) wrote:
- quote -

> Stuart A. Bronstein <spamtrap[at]lexregia.com> wrote:

> > If it is, in fact, a grantor trust, all income tax
> > consequences fall to the grantor, not to the trust. So no,
> > past returns were not required to be filed, and need not be
> > filed at this time..

> Does this being an irrevocable trust affect the answer?

No.

Stu

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

#3 12-12-2005, 05:22 AM

"ed" <edcosoft[at]sbcglobal.net> wrote:

- quote -

> Gene: Someone is mixed up I think, The trust is either:
> 1. A irrevocable life insurance trust wherein the death
> benefit would not be in his estate but someone should have
> been filing 1041s for it under its TIN. or
> 2. It is a revocable "grantor trust" wherein the death
> benefit is includable in his estate and he should have been
> including the income and gains in his 1040, with NO 1041 nor
> special TIN.

Irrevocable trusts can be grantor trusts, though revocable
trusts are necessarily grantor trusts.

Stu

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

#2 12-12-2005, 03:30 AM

Gene: Someone is mixed up I think, The trust is either:
1. A irrevocable life insurance trust wherein the death
benefit would not be in his estate but someone should have
been filing 1041s for it under its TIN. or

2. It is a revocable "grantor trust" wherein the death
benefit is includable in his estate and he should have been
including the income and gains in his 1040, with NO 1041 nor
special TIN.

ed

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

#1 12-12-2005, 03:10 AM

Stuart A. Bronstein <spamtrap[at]lexregia.com> wrote:
- quote -

> "Gene" <GeneRoberts[at]volcanomail.com> wrote:

> > I'm helping a relative with an irrevocable grantor trust.
^^^^^^^^^^^
> > His dad set the trust up some years ago and buys stock with
> > the initial investment held in the trust name. Dad also buys
> > a life insurance policy to pay off when he dies in the trust
> > name. Over the years stock is sold to pay the insurance
> > premiums but no returns are filed for the trust. Now Dad
> > dies and policy will pay off. Question is will returns need
> > to be filed for each of those years back in which there were
> > capital gains? Will I be correct in assuming there would
> > also be interest and penalties due as well? Obviously there
> > are no taxes on the life insurance proceeds but is there
> > anything else to be aware of?

> If it is, in fact, a grantor trust, all income tax
> consequences fall to the grantor, not to the trust. So no,
> past returns were not required to be filed, and need not be
> filed at this time.
> The one drawback with this kind of scheme is that, depending
> on how it is structured and the size of the estate, the life
> insurance death benefit might be included in Dad's taxable
> estate for estate tax purposes.

Does this being an irrevocable trust affect the answer?

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

12-09-2005, 12:44 AM

"Gene" <GeneRoberts[at]volcanomail.com> wrote:

- quote -

> I'm helping a relative with an irrevocable grantor trust.
> His dad set the trust up some years ago and buys stock with
> the initial investment held in the trust name. Dad also buys
> a life insurance policy to pay off when he dies in the trust
> name. Over the years stock is sold to pay the insurance
> premiums but no returns are filed for the trust. Now Dad
> dies and policy will pay off. Question is will returns need
> to be filed for each of those years back in which there were
> capital gains? Will I be correct in assuming there would
> also be interest and penalties due as well? Obviously there
> are no taxes on the life insurance proceeds but is there
> anything else to be aware of?

If it is, in fact, a grantor trust, all income tax
consequences fall to the grantor, not to the trust. So no,
past returns were not required to be filed, and need not be
filed at this time.

The one drawback with this kind of scheme is that, depending
on how it is structured and the size of the estate, the life
insurance death benefit might be included in Dad's taxable
estate for estate tax purposes.

Stu

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

#-1 12-08-2005, 05:42 AM

I'm helping a relative with an irrevocable grantor trust.
His dad set the trust up some years ago and buys stock with
the initial investment held in the trust name. Dad also buys
a life insurance policy to pay off when he dies in the trust
name. Over the years stock is sold to pay the insurance
premiums but no returns are filed for the trust. Now Dad
dies and policy will pay off. Question is will returns need
to be filed for each of those years back in which there were
capital gains? Will I be correct in assuming there would
also be interest and penalties due as well? Obviously there
are no taxes on the life insurance proceeds but is there
anything else to be aware of?

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

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