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Navigating Section 645 Elections in Estate Planning: Qualified Revocable Trusts, Requirements, Tax Implications

Recording of a 90-minute CLE/CPE video webinar with Q&A

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Conducted on Tuesday, November 12, 2024

Recorded event now available

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This CLE/CPE course will provide estate planning counsel and advisers with a comprehensive guide to the tax planning opportunities and pitfalls to avoid with making a Section 645 election to treat qualified revocable trusts (QRTs) as estates. The panel will discuss the advantages of electing estate treatment of existing revocable trusts, describe the impact of the "separate share rule" of IRC 663 in calculating distributable net income (DNI), and detail tax allocation strategies.

Description

Section 645 provides an opportunity to combine the filing of the trust return with the estate income tax return. When properly elected, the trust's income and expenses are reported along with the estate's, using the estate's year-end rather than the trust's required calendar year-end. Since estates often elect a fiscal year-end based on the decedent's date of death, this can significantly delay the filing requirement and paying the tax obligation.

Making the election allows many small estates to file a first and final Form 1041. Making the election, however, is irrevocable. While this election can provide significant flexibility, advisers must be aware of the potential tax consequences of failing to properly allocate income and distributions between the estate and its component trust. Also, the election terminates and, at the end of the termination period, beneficiaries could receive two K-1s, sometimes negating any tax benefit received from making the election.

Listen as our panel of trust and estate experts explains the caveats and considerations of making a Section 645 election and the advantages of electing estate treatment of existing revocable trusts. The panel will also discuss the impact of the "separate share rule" of IRC 663 in calculating DNI, and detail tax allocation strategies.

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Outline

  1. Qualified revocable trusts
  2. Section 645
    1. Making the election
    2. Impact of Sec. 645 election
    3. Due dates and expiration
  3. Tax benefits
    1. Charitable contributions
    2. S corporation stock
    3. Estimated tax payments
    4. Certain passive losses
    5. Other benefits
  4. Other issues to consider
    1. Termination
    2. Separate share rules
    3. Other caveats

Benefits

The panel will discuss these and other important topics:

  • What types of trusts qualify as QRTs and are eligible to make a Section 645 election?
  • How is the "separate share" rule applied to DNI calculations and allocations between the QRT and the estate after the election?
  • What post-mortem tax planning strategies are available with a Section 645 election?
  • Mechanics of making the election with initial income tax filing

Faculty

Doyle, Jere
Jeremiah W. (Jere) Doyle, IV
Senior Vice President
Bank of New York Mellon

Mr. Doyle provides clients with integrated wealth management advice on how to hold, manage and transfer their...  |  Read More

Access Anytime, Anywhere

Strafford will process CLE credit for one person on each recording. CPE credit is not available on recordings. All formats include course handouts.

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