Form 8855: Qualifying Trusts, Filing Deadline, and Election Benefits

Form 8855 is the IRS form an executor and trustee use to make a Section 645 election, which lets a decedent’s qualified revocable trust be taxed as part of the estate rather than as a separate trust for a limited period after death. Filing it combines the trust and estate into a single income tax reporting entity, which unlocks several tax breaks that estates get and trusts do not. The election is irrevocable once made, and the deadline to file is the due date, including extensions, of the first Form 1041 for the estate or electing trust.¹

Which Trusts Qualify

Only a qualified revocable trust (QRT) can be included. A QRT is a trust, or portion of a trust, that the decedent was treated as owning at death because the decedent personally held the power to revoke it under Section 676 of the Internal Revenue Code.²¹ The typical example is a standard revocable living trust used in estate planning.

The power has to have been the decedent’s. A trust where only a nonadverse party or the decedent’s spouse held the power to revoke does not qualify. If the decedent had more than one revocable trust, the election can be made for some or all of them, and each trust joining the election must be listed on the form.³

Who Signs and Files

The election needs signatures from both the executor of the decedent’s estate and the trustee of each QRT joining. Both sign under penalties of perjury.⁴

Many people with revocable living trusts never go through probate, so no executor is ever appointed. When that happens, the trustee of the QRT becomes the “filing trustee” and can make the election alone. The filing trustee then handles the combined return during the election period.³

If an executor is later appointed after a filing trustee has already made the election, the filing trustee must file an amended Form 8855 if the new executor agrees to continue the election. Miss that amendment and the election period ends the day before the executor’s appointment.⁵

The Filing Deadline and What Goes on the Form

Form 8855 must be filed no later than the due date, including extensions, of the Form 1041 for the estate’s first taxable year. Where there is no executor, the deadline is the due date of the first Form 1041 for the electing trust. The deadline applies even if the first year does not have enough income to actually require a Form 1041.¹ For an estate on a fiscal year, that due date lands on the 15th day of the fourth month after the year closes.

Missing the deadline ends the opportunity. There is no late-filing exception, and the election cannot be revoked once made.⁴

The form itself asks for:

The decedent’s full name, Social Security Number, and date of death.
Names, addresses, and taxpayer identification numbers for the executor (if any) and each QRT trustee joining the election.
A new Employer Identification Number the trustee obtained for the trust after the decedent’s death.
Confirmation that the parties have agreed on how the combined entity’s tax liability will be allocated between the trust and the estate.

Keep a copy of the signed form and proof of timely filing.

What the Election Gets You

The reason to file is that estates enjoy income tax treatment that trusts do not. Combining the two entities extends those benefits to the trust’s income during the election period.

A Fiscal Year Instead of a Calendar Year

Trusts must use a calendar year under Section 644.⁶ Estates can pick any fiscal year ending on the last day of any month except December. The combined entity uses the estate’s fiscal year, which gives the executor real room to defer income into a later tax year or time distributions so income lands where beneficiaries face less tax.

A Larger Exemption

Estates get a $600 exemption. A trust required to distribute all income currently gets $300, and other trusts get $100. Under the election, the trust’s income gets the $600 estate figure.⁷

No Estimated Tax Payments for Two Years

Estates are exempt from estimated income tax payment requirements for any taxable year ending within two years of the decedent’s death. Trusts generally are not. Under the election, the combined entity gets the estate’s exemption, which helps cash flow during early administration.⁸

Broader Charitable Deductions

Estates and trusts both get the Section 642(c) deduction for gross income the governing instrument directs to charity, with no percentage cap. Estates can also deduct amounts the governing instrument directs to be permanently set aside for charity even before payment. That set-aside deduction is generally unavailable to trusts created after October 9, 1969, and the election restores it for the combined entity.⁹

Rental Real Estateh3>

A decedent’s estate is treated as actively participating in rental real estate for tax years ending less than two years after death, provided the decedent would have met the active participation standard in the year of death. That opens the $25,000 rental loss allowance to the combined entity during the two-year window.

How Long the Election Lasts

The election period begins on the date of death and ends on the earlier of two events: the day the electing trust and estate have distributed all of their assets, or the day before the “applicable date.”³ The applicable date depends on whether the estate has to file a federal estate tax return:

If no Form 706 is required, the applicable date is two years after the date of death.
If Form 706 is required, the applicable date is six months after the final determination of estate tax liability, which can come from an IRS closing letter, a court decision, a settlement agreement, or expiration of the estate tax statute of limitations, whichever happens first.¹

For estates below the federal filing threshold, the window runs about two years. Estates that must file Form 706 can see the election extend considerably longer, depending on how long the IRS takes to resolve the estate tax liability.

Filing Returns During the Election

When there is an executor, the executor files one Form 1041 each year under the estate’s name and TIN, combining the trust’s income, deductions, and credits with the estate’s. The trustee does not file a separate Form 1041 for the electing trust during the election period but has to give the executor everything needed to complete the combined return.³

When there is no executor, the filing trustee files Form 1041 under the TIN obtained for the trust after death, treating the trust as an estate.³

When the Election Ends

Once the election period closes, the trust separates back out and becomes its own filing entity again. The IRS treats the split as a deemed distribution from the combined entity to a “new trust,” which produces a distribution deduction on the final combined return and includable income for the new trust to the extent the ordinary distribution rules require.³

From that point forward, the trust switches to a calendar year, resumes estimated tax payments, and files its own Form 1041. Every estate-level benefit the election provided disappears. If the trust holds income-producing assets that will keep generating tax after the election ends, plan for the transition well before the applicable date arrives.

1
Office of the Law Revision Counsel. 26 USC 645 – Certain Revocable Trusts Treated as Part of Estate
2
Justia. United States Code Title 26 – 676 Power to Revoke
3
eCFR. 26 CFR 1.645-1 – Election by Certain Revocable Trusts to Be Treated as Part of Estate
4
Internal Revenue Service. Form 8855 – Election to Treat a Trust as Part of an Estate
5
Internal Revenue Service. Form 8855 – Election to Treat a Qualified Revocable Trust as Part of an Estate
6
Office of the Law Revision Counsel. 26 USC 644 – Taxable Year of Trusts
7
CCH AnswerConnect. Personal Exemptions for Estates and Trusts
8
Office of the Law Revision Counsel. 26 USC 6654 – Failure by Individual to Pay Estimated Income Tax
9
Office of the Law Revision Counsel. 26 USC 642 – Special Rules for Credits and Deductions