Questions on an estate account

What is the name of your state? california

1) Is there a time limit that a decedent's estate account can remain open & funded? Is there a time limit on when the assets must be distributed? Is there any downside to letting things ride?

2) If interest reinvests, do beneficiaries still receive K-1s on the income or does the estate pay the tax on it at the trust tax rate?

3) Can interest be distributed at any time without restriction? Or if it must it be distributed yearly, can it be on a fiscal calendar?

Thank you very much for your time.

1) Is there a time limit that a decedent's estate account can remain open & funded? Is there a time limit on when the assets must be distributed? Is there any downside to letting things ride?

A: No, no, and you could get sued for not doing your job.



2) If interest reinvests, do beneficiaries still receive K-1s on the income or does the estate pay the tax on it at the trust tax rate?

A: The entity who gets the income from the reinvestment pays the taxes.



3) Can interest be distributed at any time without restriction? Or if it must it be distributed yearly, can it be on a fiscal calendar?

A: What does the will and the court say about your two questions?

What does the will and the court say about your two questions?

Click to expand...

The trust says the assets are to be split equally between all family members. There's a bond that we all agree would be imprudent to split or sell; we'd like to let it continue earning interest and let it mature in the account. Is this permitted? Must we disperse the interest? Or can we let it accumulate in the trust account? If it must be dispersed, can it be fiscally?

Thanks again.

What kind of a bond? Why not sell?

There is a difference between a decedent's estate and a trust. Which one are you dealing with?

What kind of a bond? Why not sell?

Click to expand...

It's a high-interest muni bond. We're enjoying the tax free interest from it. Selling it in order to repurchase separate bonds would result in spreads and commissions that would eat a good chunk of value.

There is a difference between a decedent's estate and a trust. Which one are you dealing with?

Click to expand...

This is a good question. I hope you can help answer that for me. All of the decedent's assets were in the his trust account. The account was previously under his SSN but we changed it to an administrative trust tax ID provided by the IRS. On the 1041 tax return, the 'Decedent's Estate' check-box was checked off.

The entity who gets the income from the reinvestment pays the taxes.

Click to expand...

The prior year's 1041 tax return has the "Decedent's estate" check-box checked off and the name on the return is "Estate of ..... Administrative Trust". There was a a $600 exemption but no taxes were due on the return as K-1s showing income were issued to the beneficiaries even though no distributions were received by the beneficiaries.

With estate returns, do K-1s get issued even though income isn't distributed? Does this process continue until the estate account is closed? How long is my family permitted to keep assets in the estate account?

Thank you for your help!

Aaron3,

I think you should take a better look at selling the bond and distributing. You said, "It's a high-interest muni bond. We're enjoying the tax free interest from it." Commissions on the buying and selling of bonds are very low. Bonds of all types are very available including very similar muni bonds. I think you are getting poor advice concerning the bond.

Your goal should be to wrap this up as soon as possible and move on.

curb1,

I really appreciate and will act upon your advice. But it will have to wait until after April 15th. As that date is quickly approaching, I really need to find out whether the tax return for this year has taxable income. Other than telling me to see or ask my accountant (he's indisposed), might you be able to tell me if an estate return pays taxes on its current income? Or are K-1s always issued to the beneficiaries?

Thank you.

Thank you to all of you who helped me. I found the answers I needed in Pub 559:
http://www.irs.gov/pub/irs-pdf/p559.pdf

Cheers!

You asked, "you be able to tell me if an estate return pays taxes on its current income?"

From IRS publication 559 , "The estate's income, like an individual's income, must be reported annually on either a calendar or fiscal year basis. As the personal representative, you choose the estate's accounting period when you file its first Form 1041. The estate's first tax year can be any period that ends on the last day of a month and does not exceed 12 months."

"The estate's taxable income generally is figured the same way as an individual's income."

You (or the personal representative) should be very familiar with Publication 559. This can be found easily on the IRS website.