Level 2

Revocable Living Trust

Forum|Forum|5 years ago
June 26, 2020
3 replies
1 view

I have a new client that has used the free tax prep service from the AARP the past few years. She has her investments and IRA in revocable living trusts, with each trust having it's own EIN. The recipient's ID number on each 1099 is the trust EIN. 2018 was the first year she had the trusts. The AARP filed everything on her 1040, as though the trusts didn't matter or exist. And I might be overthinking this, but my research on this shows that, if the revocable living trust has been set up, has an EIN, then a 1041 is required with my client as the beneficiary. Am I correct about this?

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sjrcpa

Level 15

A revocable living trust is ignored for tax purposes.

The more I know the more I don’t know.

Just-Lisa-Now-

Intuit Community Champion

All my clients with revocable living trusts, they still have their SSN on the 1099s...is that common for a revocable living trust to have an EIN?

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

sjrcpa

Level 15

It depends. I see about 50/50 with SSN vs EIN.

The more I know the more I don’t know.

BobKamman

Level 15

Without looking it up again -- I protect most of my clients from living trusts, so I don't deal with this question too often -- the trust can have an EIN but no 1041 filing requirement unless the trustee is not the grantor/beneficiary. Back in the old days, it was more common to get an EIN even if not needed.

You cannot put an IRA into a trust. An IRA is already a trust. You can name a trust as beneficiary of an IRA, but generally that is foolish and can cost thousands in taxes. If you look at the 1099-R for the IRA distribution, you will see her SSN.

T

TaxGuyBill

Level 15

@BobKamman wrote:
-- I protect most of my clients from living trusts,

Protect them? Why are you against them?

rbynaker

Level 13

@TaxGuyBill wrote:
@BobKamman wrote:
-- I protect most of my clients from living trusts,
Protect them? Why are you against them?

They have their uses in certain situations but are often "recommended" to people who don't need them by people who make money off of recommending trusts to people who don't need them. 🙂

https://www.kiplinger.com/article/saving/t021-c000-s002-why-you-do-not-need-a-living-trust.html#:~:text=You%20don't%20need%20a%20trust%20to%20protect%20assets%20from,joint%20owner%20when%20you%20die.

qbteachmt

Level 15

For these distributions: "She has her investments and IRA in revocable living trusts, with each trust having it's own EIN. The recipient's ID number on each 1099 is the trust EIN."

When the IRA is renamed to the Trust as owner, that is complete distribution as a taxable event for her. This might be very ugly. My understanding is you name the Trust as Beneficiary, but do not Rename the IRA so that the Trust is the owner. Trust as Owner = distribution, not sheltered as a divorce renaming event would be.

I found this:

https://www.thebalance.com/ira-trust-a-special-type-of-revocable-trust-for-your-ira-3505399

It clearly describes this as "Trust is the beneficiary." Not the Owner.

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