Attorney Thomas B. Burton answers the following question: "Does a Lawyer Need to Close Out Revocable Trust in Wisconsin?"
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Welcome back, I am Attorney Thomas Burton. I am an Estate Planning & Asset Protection Attorney and today, in our 'Question & Answer Series', we have a question from Oconomowoc, Wisconsin and the writer ask the following:
"Does a lawyer need to close out a revocable trust in Wisconsin, if I, as trustee, have completed all of her requests as to giving. I have given the grandchildren the amount she requested they get, the same to the church. I have receipt, we have EIN tax number for Edward Jones to divide her holdings equally between my sister and I. Both of us are co-owners of mother's trust checking account. I have paid all bills. Is the trust inactive if all of her requests have been met or does a lawyer have to close it up?"
So, good question. One question, I have for you is, who does 'The Her' refer to? I think, you are referring to your mother, her wishes in the trust, and that's correct because that is what you want to follow is the language of the trust document itself, as to what it says. So, assuming all those things you listed, on what was said in the trust document, good job following those steps as laid out there.
Now, I can't tell if you have an attorney here and you are saying you did what the attorney asked or you are saying what your mother asked but I think you are saying, you did what your mother asked and maybe there's no attorney involved. But if you have an attorney involved, I would talk with them about whether there was enough income during the period the trust was opened to require the trust to file a final tax return to report that income. And the other thing to make sure is that you file a final tax return for the person who passed away, sounds like it was your mother. So you want to make sure they file an individual final tax return and then, you need to see if the trust needs to file a tax return for the period it was open. And this is an important step to take if all the businesses of the trust have been wrapped up. As is often the case with many revocable trust, they are designed to distribute assets after death and then, go away.
But trust need to file Tax Return if they have $600 or more in income, in the year. Or if the trust has a non-resident alien as a beneficiary. So that would be someone, if you don't have that situation, then it says $600 or more in income, and IRS, if you go on to their website, they have a Q&A about filing for trust tax return to what's required but I would work with a CPA Tax Advisor who is going to file the final Tax Return for your mother, and figure out if the trust had any income that would require it to file.
Otherwise, the good news about trust planning is there's way less to do after someone passes away than there's with a probate, all the paperwork you would need to file to close an estate in probate. So if the trust does not have over $600 in income and you wrap everything up in the first year, after the person dies, often the trust administration can be quite simple.
So what you are describing here sounds like that to me. But again, I would check with your lawyer, if you have one and with your tax advisor about those tax filing requirements.
So great question and thank you, for asking.
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