Decendents Estate Form 1041

[schirallicpa]

Clients mom died in 2007. Had savings bonds. An estate was set up for the savings bonds, and cashed out. Estate has 1099 interest totalling 21000. They want to close estate - no need to keep open. Doesn't the 21000 have to pass to the beneficiaries? They want the estate to pay tax, but I always thought with such an estate, it passes thru. (I suspect they would pay less tax letting it pass thru.....but, who am I to suggest it's a dumb idea.)

Help.

[TaxCPANY]

Clients mom died in 2007. Had savings bonds. An estate was set up for the savings bonds, and cashed out. Estate has 1099 interest totalling 21000. They want to close estate - no need to keep open. Doesn't the 21000 have to pass to the beneficiaries? They want the estate to pay tax, but I always thought with such an estate, it passes thru. (I suspect they would pay less tax letting it pass thru.....but, who am I to suggest it's a dumb idea.)

Help.

Pass-through is not mandatory. Administrator has options, and, in fact, equity sometimes is better served by taxing the estate rather than beneficiaries whose marginal rates could be all over the board. VTY, TaxCPANY

[ed_accountant]

You do not need to pass income especially if no cash was paid out. Usually, you pass income when income is distributed.

[Linda Mathey]

When facing a situation like this, select a year-end prior to making any distributions. Then the estate will pay the tax and the estate can distribute the first day of new year. For example if you select July 31 and no distributions have been made, the tax will have to be paid by the estate. Then on Aug 1 distribute the monies remaining, close the estate and file final return.

[Jill Kubiak]

Hi,

Unless things have changed, you can elect to file US gov't savings bond interest on the final return of the decedant. I did one a couple years ago. Client was in the nursing home and medical wiped out most of the income.

Just another option depending on your circumstances.

Jill

[OldJack]

>>you can elect to file US gov't savings bond interest on the final return of the decedant.<<

I don't think that is the correct way to report the estate income.

[schirallicpa]

Well - that is what they are going to do. The bank has agreed to re-issue the 1099 in the decedent's name.

Now - in the mean time I was given a different piece of info: That if the will states that everything should be distributed then it must be distributed, and cannot stay at the estate level. Otherwise, the state will step in and tell you the same. Otherwise, if the will states a purpose for the money of the estate which create perpetuality, then the admin can elect to have the estate pay the tax. But I haven't found anything in writing supporting this either.

Everything I find is rather murky or referencing very complex stuff.

You always get these people right at the end of the season.

[Linda Mathey]

Well - that is what they are going to do. The bank has agreed to re-issue the 1099 in the decedent's name.

Now - in the mean time I was given a different piece of info: That if the will states that everything should be distributed then it must be distributed, and cannot stay at the estate level. Otherwise, the state will step in and tell you the same. Otherwise, if the will states a purpose for the money of the estate which create perpetuality, then the admin can elect to have the estate pay the tax. But I haven't found anything in writing supporting this either.

Everything I find is rather murky or referencing very complex stuff.

You always get these people right at the end of the season.

Most wills specify either that after all bills are paid the balance is to be divided between X & Y or the will may specify that a trust be set up. I have handled numerous estates and even those that are to be distributed are still open long enough to make sure that all bills are paid. Sometimes you get medical bills from the last illness, utilities, etc. that need paid. However, it is also true that with US savings bonds if they are cashed as soon as possible then that income can be reported on the decendents final tax return. Just make the election to do so.

[Maura]

The 1099 would not be reissued. The accrued interest to date of death would be reported on the decendents final 1040 return. The administrator for the estate can do this. Then the interest which accrued from date of death till sold would be reported on the 1041 and can be passed to the bene's. Need to look at what is most advantageous tax wise.

[schirallicpa]

I appreciate everyones help on this!! Are there any good reference books or basic guides on this stuff? I just haven't got anything on it and can't find anything thats not much more complicated than I need. I do very few dead people, and usually someone else has figured everything out, and I just fill in the figures.

Thanks again.

[BobinNJ]

I appreciate everyones help on this!! Are there any good reference books or basic guides on this stuff? I just haven't got anything on it and can't find anything thats not much more complicated than I need. I do very few dead people, and usually someone else has figured everything out, and I just fill in the figures.

Thanks again.

Good books on subject 1) Book from Fiduciary (form 1041) Workshop , from the National Center for Professional Education in Zachary, LA. I've been to their workshops and they are good. Phone # 800-682-2163.

2) Go to WWW.NATPTAX.com for the National Association of Tax Professionals and check out their bookstore. Theirs is less comprehensive than the one above.

Bob