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Tax Law (Questions About Taxes)/tax filing for family trust


I am successor trustee to our family trust and, along with my brother,also a beneficiary. it has a small estate under $150,000. My mom, who passed this last december, only had social security of $17000 and about $8000 a year from interest, pension. so her basis and modified AGI was under $25000. question about filing a 1041 and a 541 arises as to whether or not these are needed to be filed by apirl 16, 2014 since the trust, with its new EIN has not accrued more than $600 in I need to still file these 1041 and 541(california) forms?  
thank you for any help you can provide

Before we cover the tax implications of your intended path. . .

A trust is separation of the aspects of ownership. The grantor places an asset into a trust and effectively divides the ownership between separate parties, there is the beneficial interest (beneficiaries) and there is the operational involvement (trustees).

When the trust was created and your parents were the trustees and you and your brother were the beneficiaries the trust had purpose.

Now the separate elements of ownership have been merged. You are the beneficiary and the trustee, the trust ceases to exist.

Not that anyone is going to oppose you continuing to operate under the fiction of a trust, but if the situation arises that claiming you operated incorrectly would be advantageous by another party, that claim could be made. If that other party is the IRS then that claim might result in tax liabilities, disallowances of deductions, etc.

Prior to your mothers passing, the tax liability of the trust income was passed to her and she accounted for it on her personal tax return.

Taxes for/through trusts are handled in one of two ways, they are attributed (either to the grantor, or to the beneficiaries) or they are retained by the trust and paid directly. Trusts are taxed at 39.6% on every dollar over $9600. This is a BAD tax rate.

The trust must have had terms of distribution, there is no better time to distribute and terminate the trust.

IF you want to continue as if the trust exists, then yes, complete the forms to memorialize the events of the years, even the fact that little or no money was generated.

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Richard Fritzler


Specializing in Business and Corporate taxation. Comparing the advantages and requirements of different business entities, such as Sub-S Corporations, LLC`s, Partnerships (Both Limited and General), Doing Business as a Sole Proprietor, or Using a C-Corporation. Issues regarding K-1 distributions, 1040, schedule C, 1120, 1120s. Are you considering domiciling a Corporation in a low tax state? I can review the benefits and misinformation that exists.


I have been in the business of assisting business owners in reducing their taxes and liability since 1986.

National Small Business Owners Association.
Contributing author to "The Corporate Standard Newsletter".

Contributing author to "The Corporate Standard Newsletter".

I have been in the business of assisting business owners in reducing their taxes and liability since 1986.

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