Glendale, CA asked in Estate Planning and Tax Law for California

Q: does the trust have to get a s.s. number and pay taxes every year?

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2 Lawyer Answers
James Edward Berge
James Edward Berge
Answered
  • Estate Planning Lawyer
  • San Jose, CA
  • Licensed in California

A: In general, if the trust is revocable, no. The trust is identified for tax reporting purposes by the Social Security Number of the trustmaker and all trust income if any is reported on the trustmaker’s annual 1040 individual income tax return.

And in general, if the trust is irrevocable, yes, but only if you intend to open a bank account in the name of the trust and/or have reportable 1099 income to the trust, and all trust income would be reported on a separate 1041 trust income tax return.

But, there are instances where an irrevocable trust is regarded as owned by the individual trustmaker, also known as a grantor trust, where trust income is reported directly on the annual 1040 of the trustmaker rather than a separate trust income tax return.

If in doubt you really should ask a CPA or trust and estates attorney for specific advice.

Nina Whitehurst agrees with this answer

Jeffrey Louis Gaffney
Jeffrey Louis Gaffney
PREMIUM
Answered
  • Estate Planning Lawyer
  • Carlsbad, CA
  • Licensed in California

A: You can make any trust into a Grantor Trust, where the original grantor (settlor; the guy with the money) just keeps paying the taxes himself on his 1040. Trusts have a very high tax rate so most people do it that way.

When the grantor dies (even of a Living Trust) then you have to get the Trust its own tax ID and pay taxes.

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