5 Key Things a Trustee Will Need to Prepare a Trust Return

There are many responsibilities placed at to foot of a trustee when the grantor of a trust passes away. One of them is to prepare the tax return of the trust. Today, we will discuss 5 things a trustee should be collecting as soon as possible.


One of the most important things is the trust document itself. This is the guiding instrument that will tell your preparer and anyone else the what, who, how, and when. Without this, we are all just guessing as to what is supposed to happen. Also included in this document is the beneficiaries. While their names and birthdays may be there, information like their Social Security numbers and addresses are not.


This leads to number 2, the beneficiary information, specifically names, addresses, and Social Security numbers, need to be collected. Having said that, you may not need all that information in 100% of all the times, but it is always easier to get in the beginning than it is at the end and it is almost always needed.


After someone passes away, a trust that has taxable income will need to file for a tax ID number. For trusts, they are EINs or employer identification numbers. I know, it says employer, that is just what they call it. Typically, your attorney will file this for you on the IRS website and you will have a form SS-4 as your documentation of the trust name and its identification number.


Under current law, when someone passes away there is a valuation for all the assets that pass on to the trust beneficiaries. Typically, it is called a step-up in basis; however, there can be a step-down. Think of a home purchased in 2006, but the owner passed in 2009. In the case of a residence or real property, there must be an appraisal from a licensed appraiser. The market evaluation from your favorite real estate agent does not count in the eyes of the IRS nor with that stand up if it was challenged in court. Assets such as investments the basis can be found relatively easily if it is not provided by the brokerage firm. Other assets may need an appraiser of sorts if we're talking about collectibles, though most household items do not need anything special. Knowing these amounts will also be important if the trust is going to need a specific dollar amount funding it.


This last one can be made up of several documents. Similar to the documents when you file your personal tax returns, you need to have all the reporting documents for income and deductions. For a trust return, the typical documents would include a final closing statement from escrow and 1099 forms. The 1099 forms will be reported under the tax ID number of the trust, but may still have the SSN (Social Security Number) of the deceased grantor.

There can be additional documentation needed, but these five key areas show up in every single trust return done, and the sooner you can gather them, the less headache you will have a year from now. Grandfield Tax has experts that are trained to guide new trustees through this process. Contact our office at 714-921-2790 if you are feeling overwhelmed.

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