Home Loans and Support

IRS Regulations for IRAs in Revocable Living Trusts

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).


About Moe Bedard

My name is Maurice Bedard, but most people call me Moe. I am the founder of America's #1 Mortgage Forum, LoanSafe.org, and also a website design firm called We Create Web Designs. 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.

Comments are closed.

Get free unbiased help with your tough questions. Start your own threads and post replies with over 60,000 people just like you.

LoanSafe Forums

TESTIMONIALS

"Hello Moe, I just wanted to tell you, your website has saved my life (literally), I stumbled on your site in the middle of losing my home, I was able to network with people going through the same thing as I am. I didn't feel alone anymore, I have tried to give back and counsel those that haven't walked in my shoes yet. We hear so much about what is wrong with America, I just wanted you to know, you are whats "right" with America."

Nina Mitchell
Loansafe & MoeSeo Inc. © 2014 | LoanSafe.org is not a bank, lender, mortgage broker, law firm or affiliated with the US Government. Privacy Policy