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Do I file an estate Trust as final or not final? Would like to knowwhat criteria is used to determine.

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May 24, 2022
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TurboTax Online

Best answer by Anonymous_

See https://www.irs.gov/instructions/i1041#en_US_2021_publink1000286084

A final return (1041) is filed after termination of the estate or trust.

A final return can be filed even if a small amount of cash is retained to cover administrative, settlement, and other expenses.

See Treas. Reg. § 1.641(b)-3

https://www.law.cornell.edu/cfr/text/26/1.641(b)-3

It is always wise to consult with a qualified professional, in person, with respect to winding up affairs of the estate and/or trust and filing a final return.

A

Anonymous_Answer

Employee

See https://www.irs.gov/instructions/i1041#en_US_2021_publink1000286084

A final return (1041) is filed after termination of the estate or trust.

A final return can be filed even if a small amount of cash is retained to cover administrative, settlement, and other expenses.

See Treas. Reg. § 1.641(b)-3

https://www.law.cornell.edu/cfr/text/26/1.641(b)-3

It is always wise to consult with a qualified professional, in person, with respect to winding up affairs of the estate and/or trust and filing a final return.

A

a_maldonadoAuthor

Thank you for your comments.

So, what constitutes termination of the trust?

As the Executor, do I have the discretion to file the 1041 return "Not Final"?

If I do file the return Final, does the EIN remain valid ?
I have an account with a small amount of principal I want to be sure that I can access.

I'm curious, do I have more legal standings against Beneficiaries if I don't terminate the trust?

I really appreciate your input.

Thank you

A

Anonymous_

Employee

You simply have to read paragraph B of the Regulation to which I linked in my previous post.

Generally, the determination of whether a trust has terminated depends upon whether the property held in trust has been distributed to the persons entitled to succeed to the property upon termination of the trust rather than upon the technicality of whether or not the trustee has rendered his final accounting. A trust does not automatically terminate upon the happening of the event by which the duration of the trust is measured.

A reasonable time is permitted after such event for the trustee to perform the duties necessary to complete the administration of the trust. Thus, if under the terms of the governing instrument, the trust is to terminate upon the death of the life beneficiary and the corpus is to be distributed to the remainderman, the trust continues after the death of the life beneficiary for a period reasonably necessary to a proper winding up of the affairs of the trust.

However, the winding up of a trust cannot be unduly postponed and if the distribution of the trust corpus is unreasonably delayed, the trust is considered terminated for Federal income tax purposes after the expiration of a reasonable period for the trustee to complete the administration of the trust. Further, a trust will be considered as terminated when all the assets have been distributed except for a reasonable amount which is set aside in good faith for the payment of unascertained or contingent liabilities and expenses (not including a claim by a beneficiary in the capacity of beneficiary).