When someone with an IRA account dies, his designated beneficiary typically inherits the IRA. The relationship of the deceased to the beneficiary determines what the beneficiary can do with the account. A living trust does not save a penny in income or estate taxes. The IRS treats property in a revocable living trust as it would any other property owned by the creator.

An individual with a living trust continues to use his/her social security number when filing a tax return and reporting any income received from assets in the trust. Because of this, it is recommended that the creator use his/her own social security number as their trust identification number. 

Until the creator of a revocable living trust dies, the trust can use the creator’s social security number for its TIN, and does not have to file a separate Form 1041. All items of income and deduction for assets titled to the revocable living trust simply go on the creator’s Form 1040 as if the assets were titled in the creator’s name.

There are, of course, exceptions (this is the Internal Revenue Code, you know). The rules are:

If the creator of the revocable living trust is living, the trust does not need to apply for a TIN, and does not file a fiduciary income tax return (IRS Form 1041).

Exceptions: Even though the trust creator is living, the trust needs its own TIN and must file a separate statement attached to a Form 1041 (but does not report income and deductions on the 1041 itself) if:

  • The trust creator has a fiscal tax year; or
  • The trust creator is a not a resident of the U.S. and is not a U.S. citizen; or
  • The trust owns any accounts or real estate located outside of the U.S. 

When the trust creator dies, the trust must apply for a TIN, and must file a fiduciary income tax return (IRS Form 1041).

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Moe Bedard
Moe Bedard
Founder at LoanSafe.org
My name is Maurice "Moe" Bedard. I am the founder of America's #1 Mortgage Forum, LoanSafe.org. My online work has been featured in the New York Times, LA Times, Fox Business, and many other media publications. I currently live in Carlsbad, California with my beautiful wife and children.

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