Tax returns

The usual set of returns

A final individual income tax return, Form 1040, reports income before death. A surviving spouse has filing choices that belong to that spouse, not to the trustee. A fiduciary income tax return, Form 1041, reports income the trust earns after death, if the trust meets the filing threshold in the instructions for that year. The federal instructions have long used a figure above a few hundred dollars of gross income. Read the current instructions rather than trusting a remembered number. South Carolina taxes fiduciary income, so a state fiduciary return may be required too.

A federal estate tax return, Form 706, is a different document. It is required only if the estate meets the filing threshold for the year of death, or if a surviving spouse needs to consider portability of an unused exemption. That threshold has changed more than once. Missing a portability election is a known and expensive mistake, and the deadline is unforgiving. Ask a CPA or a tax lawyer whether it applies. Do not decide from a website.

What to hand the preparer

Give the preparer the date-of-death inventory, the EIN letter, monthly statements, and a list of what was paid for the funeral, the debts, and the administration. Tell the preparer about retirement accounts even if they are not trust assets, because the family will ask you about them and the tax treatment is not the same as a checking account.

Choosing a tax year for an estate, deciding whether the trust should distribute income, and characterizing what you pay yourself are technical. Sign only a return you have had explained. The trustee who signs is the person the IRS will write to.

What this page will not do

It will not tell you to gift, to disclaim, to elect portability, or to distribute in December for a tax reason. Those are strategies. They depend on this family's numbers and documents. Owliver Trust is not a tax advisor, and neither is the checklist.