“They that make laws must not break them.”
– John Ray (1628 – 1705). Comp., A Collection of English Proverbs, p. 166, 1678.

Christopher S. Mulvaney,

Attorney and Counselor-at-Law

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Gonzaga University School of Law – Spokane, Washington – Class of 2002 – Cum Laude The Latin phrase “Deo patriae, scientiis, artibus” translates to “For God and country through sciences and arts”.  The initials A.M.D.G. on the seal of Gonzaga Law School stand for Ad Majorem Dei Gloriam, which is Latin for “For the Greater Glory of God” the Motto of the Society of Jesus (Jesuits): a Catholic religious order founded by St. Ignatius of Loyola.

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IRS Form 885 Section 645 Election: A Comprehensive Overview

A Section 645 election is an option under the U.S. Internal Revenue Code (IRC) that allows a qualified revocable trust (QRT) to be treated and taxed (for income tax purposes) as part of a decedent’s related estate during the election period.  

In simpler terms: When a person passes away, their revocable trust (which becomes irrevocable at death) typically has to file its own income tax returns, separate from the decedent’s estate. A Section 645 election allows the executor of the estate and the trustee of the QRT to essentially combine the trust’s income and expenses with the estate’s income and expenses on a single income tax return (Form 1041). 

Key aspects of a Section 645 election include:

• Eligibility: The election can be made by the trustees of a qualified revocable trust (QRT) and the executor of the related estate. If there’s no appointed executor, the trustee can make the election. A QRT is a trust where the decedent had the power to revoke or regain control of assets at the time of death.
• Process: The election is made by filing IRS Form 8855, Election to Treat a Qualified Revocable Trust as Part of an Estate, with the IRS, signed by both the executor and trustee.
• Duration: The election is irrevocable once made. The election period starts on the date of death and typically ends when both the trust and estate have distributed all assets, or before the “applicable date”. The applicable date is generally two years after death, or later if an estate tax return is required. 

Benefits of a Section 645 election:

• Simplified Tax Reporting: A single Form 1041 is filed for the combined estate and trust.
• Flexible Fiscal Year: The QRT can use the estate’s fiscal year, unlike most trusts which use a calendar year.
• Charitable Deductions: The trust can deduct amounts set aside for charity, similar to an estate.
• S Corporation Ownership: The trust can hold S corporation stock without requiring specific elections.
• Estimated Tax Exemption: The trust benefits from the two-year exemption from estimated tax payments that estates receive. 

In summary, a Section 645 election is a valuable tool for streamlining the tax administration of estates with a qualified revocable trust, offering advantages like simplified filing and tax planning flexibility. 

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