When a grantor – a living-trust creator – dies, the trust becomes irrevocable. An irrevocable trust is an independent taxpayer in the eyes of the IRS, required to file its own tax return. Responsibility for completing the paperwork falls to the trustee appointed by the grantor. If you're the trustee, you may be able to take almost a year to file.
The tax return due date for a trust depends on the year-end for that trust, which is based on the grantor's death date.
Trust Return Due Date
As trustee, you have a lot of flexibility in when to submit the first tax return. The first step is to pick a closing date for the trust's tax year, known as the trust year-end. Suppose the grantor dies July 14. Some trusts must choose a calendar tax year ending Dec. 31. Other trusts can use a fiscal year with an ending date as far ahead as 11 months from the death. In this case, that would be June 14 of the following year. The instructions for Form 1041 explain which trusts have that option.
Finding the Right Form
Once you set the closing date, you have 3.5 months after that to turn in the return. If you pick Dec. 31, for instance, that gives you until April 15. The form to file is 1041, the income-tax return for trusts and estates. Whatever date you set for the end of the first tax year, that will be the date you use for future tax returns too, assuming the trust is set up to last a while.
Revocable Trust Deadlines
If the trust was revocable during the grantor's lifetime, you and his executor can submit one tax return instead of two. If you and the executor both agree, she can file a 1041 for the estate that includes the trust's income. You provide the trust's financials, but the executor deals with the IRS. To take this option, you have to file Form 8855 before the executor files the estate's first 1041. The decision is irreversible.
When to Pay Estimated Tax
Even if you postpone filing the 1041 until next year, estimated tax payments may be due a lot sooner. If you think the trust's going to owe $1,000 in income tax for the year, the trust may have to pay estimated tax. Estimated tax payments are due quarterly: in April, June, September and January of the following year, though the schedule obviously depends on when the grantor dies. The Form 1041 instructions spell out which trusts have to make estimated payments.
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.