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I am the fiduciary of my now deceased partner's estate. She…

I am the fiduciary...

I am the fiduciary of my now deceased partner's estate. She died in 2016, having been granted ssa diability. We had a joint checking account into which the lump sum for back pay disability was deposited in 2017. I have received the 2017 SSA-1099 showing the lump sum, and the mailing is to me "for the estate of" my deceased partner. How do I claim/show this event on my taxes?

Accountant's Assistant: These retirement benefits are supposed to help us but they can be so complicated! The Retirement Expert will help you get the most benefits properly. Is there anything else the Retirement Accountant should be aware of?

Not to my knowledge. Thank you.

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Answered in 3 minutes by:
3/21/2018
Lane
Lane, JD,CFP, MBA, CRPS
Category: Social Security
Satisfied Customers: 14,627
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial, Social Security & Tax advice since 1986
Verified

Hi. …. My name’s Lane,

I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, to clients on three continents, since 1986.

I’m reading your question now.

Bear with me a moment while I type up my response.

….

Then if you have further questions we can go from there.

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Customer reply replied 3 months ago
Thank you.

When someone receives income AFTER the date of death, you'll need to do an ESTATE's income tax return.

...

Here's he IRS guidance on this:

...

https://www.irs.gov/businesses/small-businesses-self-employed/deceased-taxpayers-filing-the-estate-income-tax-return-form-1041

...

From there:

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When someone dies, their assets become property of their estate. ... IRS Form 1041, U.S. Income Tax Return for Estates and Trusts, is required if the estate generates more than $600 in annual gross income.

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The decedent and their estate are separate taxable entities. Before filing Form 1041, you will need to obtain a tax ID number for the estate. An estate’s tax ID number is ***** an “employer identification number,” or EIN, and comes in the format 12-345678X. You can apply online for this number. You can also apply by FAX or mail; see How to Apply for an EIN.

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Customer reply replied 3 months ago
for clarification in my mind, I am the sole beneficiary of all of her estate and surviving owner of the joint checking account into which the lump sum was deposited, so was hoping to be able to claim and pay the taxes due thru my return and not have to open up an estate.

When you do this (or have it done), you'll want to use the 1041's form K-1 to pass the income out to you.

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This is becasue Estates and trusts have VERY high tax rates (gets to the top bracket at a little over 12,000 in income, where an individual doesn't hit that highest bracket of 39.6% (for 2017) until income is over $400,000

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This is done by taking a "distribution deduction" on schedule B of the 1041 and then passing out that income to the beneficiary of the estat on a form k-1, which you'll use to prepare your own

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It's the timing of the income that's forcing the estate issue, so sorry

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Customer reply replied 3 months ago
Nothing to be sorry about at all!
Customer reply replied 3 months ago
The back pay was not expected and I want to handle it properly.

That's the way to do it.

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If you're going to do this in your own, you'll need TurboTax Business to file Form 1041, as the personal versions of TurboTax do not support this form.

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Not sure about the others.

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You might want to get some help with this one both becasue it;s an estate's return AND there can be some relief by using a special method, that lets the income be taxed (likely at lower brackets) as if i was actually received IN those different years.

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Between those TWO things, this will be a fairly complicated return.

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Customer reply replied 3 months ago
on my individual return, I can take the distribution deduction as described to myself as beneficiary of her estate. above, generate my K-1, enter as K-1 income on my individual return. Correct?

That's exactly right

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Customer reply replied 3 months ago
Also, I had obtained from the probate court, authority to "handle the funds" up to $25,000
Customer reply replied 3 months ago
just to be clear, I do not have to file an estate return -correct??

Very good, that makes you the fiduciary that IS responsible for re-titling the assets and doing the 1041 (or having it done)

...

Oh no you DO have to do the 1041. IRS will expect a 1041 becasue that check was sent to the estate, not to an individual

...

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Customer reply replied 3 months ago
Got it! Thank you so much for time and assistance. Have a wonderful rest of the afternoon.

You too!

...

You're very welcome ... Your positive rating … (by using those the stars or faces on your screen, and then clicking “submit”) …is thanks enough!

...

Thank you,

Lane

Lane
Lane, JD,CFP, MBA, CRPS
Category: Social Security
Satisfied Customers: 14,627
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial, Social Security & Tax advice since 1986
Verified
Lane and 87 other Social Security Specialists are ready to help you
Ask your own question now

Thanks so much

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