Details about the trust:
1. It was established in 1995 by my grandparents, for my mom. My mom cannot touch the trust. Grandma and Grandpa are trustees.
2. Grandpa passed away.
3. It appears to be revocable.
4. Grandma gets a 1099 every year for the "CB Family Trust"
5. It has a Federal Tax ID Number
6. It was set up this way because my mom is disabled, and the money was to provide us with the funds needed to bury her upon passing.
7. There are 3 of us kids who are listed as beneficiaries.
Should my grandparents have been filing a tax return for the last 19 years? Now that grandpa passed, grandma isn't even sure how this has been handled over the years.....
The first order of business taxwise would be to find out how the trust has been handling its tax matters in the past. If it was a revocable trust, then, generally speaking, its items of income and expense would have been reported on the grantors' tax returns, not a separate trust return. If that is not the case, then there should be copies of trust returns that were prepared for prior years. If an accountant or CPA has been handling the tax filings, that would be the first person to check with. If not, you could first check on your grandparents' returns to see if the trust's income/expense was reported on their returns or not. If not and you cannot find any trust returns, then your grandmother, as a trustee, should be able to obtain transcripts from the IRS for the trust if the trust has been filing returns.
Finally, if your grandparents were joint settlors of the trust, then it's possible that part of the trust may now be irrevocable, in which case the trust would have to start filing returns.
Best thing to do is to sit down with an accountant or CPA who has experience in this area and let her or him guide you through sorting it all out.
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An attorney or CPA would need to sit down with you an go through this. It is not clear from your description what kind of trust was set up. There are different tax treatments for different types of trusts.
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Once one of the people who created the trust passed away it is likely that it then needed to start filing its own returns. If it has not done so then, perhaps, past returns might be due and advisable. You should meet with a competent CPA - not just a tax return preparer - in your neighborhood to allow that professional to thoroughly review the facts.
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