Revocable Trust - Treasury Direct


B

baumgrenze

I've tried searching and find no good answers to this
question.

I believe I'm correct in saying that a revocable trust can
own an account with Treasury Direct and use it to purchase
T-Notes. The SS number of the grantor of the trust is
designated for tax reporting purposes.

Do problems arise on the death of the grantor, when the
trust becomes irrevocable and is given a TIN?

Here's an example. Two elderly siblings have mutual
pour-over trusts which each designate the other as primary
beneficiary. If the trust designates that all income go to
the beneficiary, it seems clear that the trustee could see
to the transfer of the income and the reinvestment of the
capital, but how would the tax ID question be resolved?

Thanks,

John
 
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S

Stuart A. Bronstein

baumgrenze said:
I believe I'm correct in saying that a revocable trust can
own an account with Treasury Direct and use it to purchase
T-Notes. The SS number of the grantor of the trust is
designated for tax reporting purposes.
I believe that's correct.
Do problems arise on the death of the grantor, when the
trust becomes irrevocable and is given a TIN?
What kind of problems? How would you normally handle it if
a non-trust owner died and the new owner had a different SS
number?
Here's an example. Two elderly siblings have mutual
pour-over trusts which each designate the other as primary
beneficiary.
So far so good.
If the trust designates that all income go to the beneficiary, it
seems clear that the trustee could see to the transfer of the
income and the reinvestment of the capital,
Right...

but how would the tax ID question be resolved?
I still don't understand what tax ID question you're talking
about.

Stu
 
H

Herb Smith

baumgrenze said:
I've tried searching and find no good answers to this
question.

I believe I'm correct in saying that a revocable trust can
own an account with Treasury Direct and use it to purchase
T-Notes. The SS number of the grantor of the trust is
designated for tax reporting purposes.

Do problems arise on the death of the grantor, when the
trust becomes irrevocable and is given a TIN?

Here's an example. Two elderly siblings have mutual
pour-over trusts which each designate the other as primary
beneficiary. If the trust designates that all income go to
the beneficiary, it seems clear that the trustee could see
to the transfer of the income and the reinvestment of the
capital, but how would the tax ID question be resolved?
On the death of either one of the siblings, the trust
becomes part of the estate of the decedent. All the assets
are distributed to the beneficiary (at least on paper) and
become their sole property. The estate is then closed.

There may be some paperwork issues, but these would be
minor. After distribution, the estate ID is no longer to be
used. Everything would then be under the tax ID of the
survivor beneficiary, and reported that way.
 
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B

baumgrenze

Thank you Stuart and Herb.

I should have been more specific. I expected the use of
'pour-over trust' to cover more than it clearly did.

The trusts are like typical marital trusts or living wills
for couples. Each designates the other as primary and then
near relatives as secondary beneficiaries. Both trusts
continue until the death of both siblings, at which time the
secondary beneficiaries inherit. During the lifetime of the
the primary survivor he or she also has the right to invade
principal if need can be demonstrated and there are no other
resources.

Perhaps the only way to deal with this particular situation
is for the successor trustee to allow the income to first be
reported via 1099 to the trust and then to file Form 1041 -
K-1 to track the reassignment of the income to the surviving
sibling.

With mutual fund companies it appears that paperwork can be
filed so that the income flows directly to the survivor and
the IRS is informed directly via 1099's.

Am I correct in concluding that this latter arrangement is
not possible with Treasury Direct?

Thanks again,

John
 
Last edited by a moderator:

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