What does a section 645 election do for a revocable trust after death?
Key takeaway
A section 645 election lets an estate and a qualified revocable trust be treated as one entity for income tax purposes after the grantor's death. An estate or trust that makes the election uses Form 8855. Practitioners describe the election as combining the revocable trust with the estate for federal income tax and as using separate-share allocations during the election period.
Making the election
An estate or trust that elects to treat a qualified revocable trust as part of the estate for income tax purposes uses Form 8855.
Practitioners say the election must be made by the due date, including extensions, for the first taxable year's Form 1041, even if no return is required.
Who signs
When there is both an executor and a trustee, practitioners describe both as signing Form 8855 and agreeing to allocate the tax burden, share information and ensure timely payment of tax.
Practitioners describe a regulation as permitting the trustee to make the election without an executor, acting as both executor and trustee, with Form 8855 filed by the trustee alone.
Why a revocable trust is a separate taxpayer without the election
A revocable trust continues uninterrupted without probate on the grantor's death. For income tax purposes it becomes a separate taxpayer that must obtain a taxpayer identification number, even if it had a separate number during the grantor's life.
What practitioners say the election does
Trust and estate practitioners describe a timely election for an estate with a funded revocable trust as able to consolidate income tax filings, defer payments, relieve estimated tax requirements and add flexibility with charitable bequests and S corporation stock.