Confused about Section 645 Election for Estate/Trust - Need Help Understanding

A Section 645 election is definitely something to consider in your situation. In simple terms, it allows you to treat the estate and revocable trust as a single entity for tax purposes, which means filing just one income tax return instead of two separate ones. The main advantages are: 1) simplified tax filing (one return instead of two), 2) potentially more favorable tax treatment for certain income items, 3) a fiscal year option that can defer income, and 4) greater flexibility with some deductions. To make the election, you'll need to file Form 8855 "Election to Treat a Qualified Revocable Trust as Part of an Estate" by the due date of the estate's first income tax return. This is typically due by the 15th day of the 4th month after the end of the tax year. The $1,800 fee from your attorney isn't unreasonable considering the expertise needed, but it's on the higher end of what I've seen. You could potentially do it yourself if you're comfortable with tax forms, but the complexity depends on the assets involved and your familiarity with tax matters.

I recently went through something similar with my father's estate. After weeks of struggling with the tax implications, I found this service called taxr.ai (https://taxr.ai) that really helped demystify the whole Section 645 election process for me. They have this feature where you can upload trust documents and get a plain-English explanation of the tax implications. I uploaded our trust docs and Form 8855 instructions, and they explained exactly what the election would mean for our specific situation - pointed out tax benefits I hadn't even considered around the stepped-up basis for some assets and how income would be distributed. Honestly, it saved me from making a couple mistakes that might have been costly, and helped me decide whether the election made sense for us.

Just wanted to update on my experience with taxr.ai after trying it out. I uploaded our trust documents and the Section 645 election form, and within minutes got really clear explanations about what each part meant. The most helpful part was that they explained the tax implications specific to our situation with the rental property my mom owned in the trust. The system actually flagged a potential issue with how the vacation property in the trust would be treated for income tax purposes that I hadn't considered. We have renters in there part of the year and I had no idea how the Section 645 election would affect the rental income reporting. I ended up doing the 645 election myself and probably saved at least $1,000 compared to what my attorney wanted to charge. Really glad I found this resource!

If you're having trouble with the IRS guidance on Section 645 elections (and who isn't, that stuff is written in lawyer-ese not English), you might want to try calling the IRS directly for clarification. I know, I know - sounds like a nightmare of hold times. After spending 3 days trying to get through to someone at the IRS about a similar trust tax issue, I discovered this service called Claimyr (https://claimyr.com). They somehow get you connected to an actual IRS agent without the ridiculous wait times. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was super skeptical but desperate after being disconnected multiple times after 2+ hour holds. With Claimyr, I got through to an IRS specialist who actually knew about Section 645 elections in about 20 minutes, and they walked me through the entire process step by step.

Well I need to eat some humble pie here. After my skeptical comments, I tried Claimyr yesterday out of desperation because I needed answers about the Section 645 election deadline. I was genuinely shocked when I actually got connected to an IRS estate tax specialist in about 35 minutes. The agent I spoke with clarified exactly how to complete Form 8855 for our situation and explained something critical - that if you miss the election deadline (which I was about to), there is a 6-month automatic extension available. This was nowhere in the materials my attorney gave me. I'm usually the first to call out services that seem too good to be true, but I have to admit this one actually delivered. Saved me from potentially making a costly mistake with our filing timeline.

One thing to consider with Section 645 elections that hasn't been mentioned yet - the fiscal year planning opportunity. If you make the election, you can choose a fiscal year end for the combined entity instead of being stuck with a calendar year, which can create some nice tax deferral opportunities. For example, if your mom passed in October 2024, you could choose a fiscal year ending September 30, 2025. This can push income recognition into the next tax year for beneficiaries, potentially saving significant taxes depending on income levels and timing of distributions. It's one of the lesser-known benefits of the 645 election that many attorneys don't emphasize enough.

When I was handling my dad's estate last year, I was also confused about the Section 645 election. My biggest mistake was not considering the state tax implications - just the federal ones. Depending on your state, the rules for estate and trust taxation can vary wildly, and sometimes making the federal 645 election has unintended consequences at the state level. In my case, our state didn't recognize the election, which meant we still had to file separate state returns even though we filed a combined federal return! Make sure to check your state's rules before deciding. This caught me completely off guard and created a lot of unnecessary complexity.

I went through this exact situation with my grandmother's estate about 8 months ago. The Section 645 election ended up being a lifesaver for us, but there are definitely some nuances to consider beyond what's been mentioned. One thing that really helped me was understanding the "qualified revocable trust" requirements. Not all trusts qualify - it has to be a trust that was revocable immediately before death and becomes irrevocable upon death. Most living trusts meet this, but it's worth double-checking your specific trust language. Also, regarding the $1,800 attorney fee - that's actually pretty reasonable if they're handling the entire election process including state considerations. When I priced it out, most attorneys in my area were quoting $2,000-$2,500 for the same work. The complexity really depends on how many different types of assets you have and whether there are any beneficiary distributions planned during the election period. One unexpected benefit we discovered was that the election made it much easier to handle the investment accounts. Instead of having to track income and gains separately between the estate and trust accounts, everything flowed through one return, which simplified our recordkeeping significantly. My advice would be to run the numbers both ways - with and without the election - especially if you're planning any major asset sales or distributions in the next year or two. The tax savings can be substantial in the right circumstances.

As someone who just completed a Section 645 election for my father's estate earlier this year, I wanted to add a few practical considerations that might help with your decision. First, regarding the $1,800 attorney fee - while it seems high, consider what's included. If they're handling the Form 8855 filing, reviewing your trust documents for qualification requirements, coordinating with your tax preparer, and providing ongoing guidance during the election period, it's actually quite reasonable. I paid about $1,500 for similar services and felt it was worth every penny given the complexity. One thing I wish someone had told me upfront: if you make the election, you'll need to be extra careful about the timing of any distributions to beneficiaries. The combined entity treatment affects how and when income gets reported to them, so you want to coordinate any distribution planning with the tax implications. Also, don't underestimate the administrative burden of tracking everything separately without the election. With $750k in trust assets and $225k in estate assets, you're looking at a significant amount of paperwork and potential for errors if you file separately. The simplified reporting alone might justify the election in your situation. My recommendation would be to ask your attorney for a detailed breakdown of what the $1,800 covers and whether they can provide a rough estimate of potential tax savings. If the numbers work out favorably, the peace of mind and simplified administration might be worth the cost.

I've been through a similar situation with my aunt's estate and wanted to share a few key points that might help with your decision. The Section 645 election can be particularly beneficial when you have significant investment assets like in your situation ($750k in the trust). One advantage that hasn't been mentioned much is how it affects the distribution deduction calculation. With separate entities, you might lose some tax efficiency on distributions, but the combined entity treatment often allows for better optimization. Regarding the $1,800 attorney fee - that's actually in line with what I paid in the Boston area. What made it worthwhile for us was that our attorney also helped us think through the timing of asset sales and distributions to maximize the benefits of the election. They essentially acted as a tax planning advisor, not just someone filling out forms. One practical tip: if you do decide to make the election, keep meticulous records of which assets originally belonged to the estate versus the trust. Even though they're treated as one entity for tax purposes, you'll still need to track this for distribution purposes and final accounting to beneficiaries. Also worth noting - the election doesn't prevent you from making interim distributions to beneficiaries, but it does give you more flexibility in timing those distributions for tax purposes. This was huge for us since some beneficiaries were having high-income years and others weren't. Given the asset values you're dealing with, I'd lean toward making the election, especially if the attorney is providing comprehensive guidance rather than just form preparation.

I'm dealing with a very similar situation right now with my father's estate, and I've found this thread incredibly helpful. One aspect I wanted to add that hasn't been fully explored is the impact on estate administration deadlines. When you make a Section 645 election, it can actually extend some of the administrative deadlines for the estate, which can be a huge relief when you're dealing with complex assets like investment portfolios and real estate. In our case, having that extra time allowed us to properly evaluate whether to sell or distribute the vacation property rather than rushing into a decision. Also, regarding your concern about the $1,800 attorney fee - I'd suggest asking them to break down exactly what services that includes. In my experience, attorneys who specialize in this area often provide value beyond just the form filing. Ours helped us identify a potential issue with how the life insurance proceeds were titled that could have created problems later. One practical question for you - have you considered the timing of when you want to wind up the estate? The Section 645 election can impact how long you're allowed to keep the estate open, which might factor into your decision if you're planning to take your time with asset liquidation or if there are any potential disputes among beneficiaries. With the asset values you're dealing with ($975k total), the potential tax savings and administrative simplification could be substantial. I'd recommend getting a second opinion from a tax professional who specializes in estate taxation if your current CPA isn't confident about Section 645 elections.

I've been lurking on this thread as I'm in a remarkably similar situation - my mother passed away 7 months ago and I'm dealing with both her revocable trust (about $820k) and estate assets (around $180k). Reading through everyone's experiences has been incredibly enlightening. What really stands out to me from this discussion is how the Section 645 election seems to offer benefits beyond just simplified filing. The fiscal year flexibility that @Sean Matthews mentioned could be huge for us since we're looking at selling some appreciated stock positions, and the distribution timing optimization that @Connor Murphy described aligns perfectly with our beneficiary situation. One thing I'm curious about that hasn't been addressed - does anyone know how the election affects the stepped-up basis treatment for trust assets? I know estate assets get the stepped-up basis, but I want to make sure making the election doesn't somehow compromise that benefit for the assets that were already in the trust. @Rami Samuels, given all the insights shared here, have you made a decision on whether to proceed with the election? The complexity of everyone's situations really drives home how individual these decisions are, but it sounds like in cases with substantial assets like ours, the benefits often outweigh the costs. Thanks to everyone who's shared their experiences - this has been more helpful than hours of trying to decipher IRS publications!

I'm in almost the exact same situation as you - my dad passed away 6 months ago and I'm executor of his estate plus trustee of his revocable trust. After reading through all the great advice here, I wanted to share what I learned from meeting with an estate tax CPA last week. The key insight for me was understanding that with your asset levels ($975k total), you're likely generating enough income from investments to push into higher tax brackets if filing separately. The Section 645 election can help smooth out the income distribution and potentially keep you in lower brackets longer. Also, something that might be specific to your situation - if that vacation property generates any rental income, the election makes tracking and reporting much cleaner. Without it, you'd need to allocate the rental income, expenses, and depreciation between two different tax returns, which gets complicated fast. One practical tip: before deciding, ask your attorney if they can provide a rough calculation of the tax difference between filing separately vs. the combined election. Most experienced estate attorneys can do a back-of-envelope estimate that might help justify the $1,800 fee. In my case, the projected savings over the election period was around $3,200, making the attorney fee a no-brainer. Have you gotten any guidance on the deadline for making the election? That was the piece that almost caught me - apparently you have to make it by the due date of the estate's first income tax return, including extensions.