Surviving spouse dies mid year with a Credit Shelter Trust. How do you allocate income to the surviving spouse's final return, then use the beneficiaries % for the rest?

Forum|Forum|2 years ago
February 24, 2024
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Skylane

Intuit Community Champion

First place I always go is to the attorney who created the trust to make sure I have a clear understanding of the terms.... that said the objective of the trust is to protect assets from inheritance tax. The income created by the assets (after death) would still be taxable to the estate or heirs.

If at first you don’t succeed…..find a workaround

A

AJMorrisAuthor

Level 4

Yep, done all that, it's really a question of ProSeries mechanics. The surviving spouse had a 100% allocation last year, and still has 100% until date of death. Then income is distributed to the beneficiaries. I'm thinking I have to manually calculate everything and not use the k-1%s (which is the default), otherwise, it won't be correct.

BobKamman

Level 15

First, who cares? As long as the income flows through to someone, and there's no obvious attempt to divert it to lower-bracket beneficiaries, IRS doesn't. Not that they audit any 1041's, anyway.

Second, if the deceased was entitled to 100% of the income for half the year, how close can you come by giving her 50% of the income for the final year, and the other 50% divided among the surviving beneficiaries? Maybe if more of the income was received late in the year, as with capital gain distributions on many mutual funds, you have to put your thumb on the scale and make it more of a 40%/60% split.

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