Buyer's Guide - If you need to file a return for a trust or estate

Form 1041 must be filed for many trusts. If you're the trustee or administrator of a trust, you'll need to prepare and file Form 1041 and the associated Schedule K-1 forms for each of the trust's beneficiaries. Each beneficiary will need a Schedule K-1 for use in preparing his own Form 1040.

TurboTax Business is the product you'll need to prepare your trust's Form 1041. Our step-by-step interview will walk you through filling out Form 1041 and will automatically generate the beneficiaries' K-1 forms for you.

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Is the trust you own a "living trust?"

You don't need to file Form 1041 for a "living trust." All of the income your trust earns and any related deductions are just reported on your personal income tax return (Form 1040). If this is the case for you, simply purchase the TurboTax Desktop or Online product that best fits your personal financial situation; you don't need TurboTax Business.

If you do have to file a trust return, which product should you use for your personal income tax return?

You'll need TurboTax Desktop or TurboTax Online to prepare your Form 1040; TurboTax Business doesn't include Form 1040. You will first prepare your trust's Form 1041 using TurboTax Business. Then you will use your Schedule K-1 prepared by TurboTax Business to do your personal taxes.

You should use either TurboTax Deluxe or TurboTax Premier. Either product will guide you through entry of the Schedule K-1 from your trust and will ensure that all trust income and deductions are reported in the right places on your Form 1040.

Not sure which to choose? Let's take a look at your personal tax situation to help you decide.

Estate income tax returns must be filed for any estate that still retains income-earning assets at the end of the year. Most estates distribute the decedent's assets shortly after death; some, however, retain ownership of those assets (stocks, rental properties, etc.) for some time afterward. The income earned from those assets is income that the estate itself must report on an estate income tax return. Such a return is filed using Form 1041 (the same form as trusts use).

TurboTax Business is the product you'll need to prepare the estate's Form 1041. Our step-by-step interview will walk you through filling out Form 1041 and will automatically generate any beneficiaries' K-1 forms for you. K-1 forms will be generated usually only when the income-earning assets have been distributed to the heirs. TurboTax Business will help you determine how much net income (income less applicable deductions) should be allocated on Schedule K-1 to the estate's beneficiaries.

What about your personal income tax return?

You'll need TurboTax Desktop or TurboTax Online to prepare your Form 1040; TurboTax Business doesn't include Form 1040. If the estate you're preparing distributed its assets during 2010, you'll receive a Schedule K-1 and must include the income and deductions from that Schedule K-1 on your personal return.

You should use either TurboTax Deluxe or TurboTax Premier. Either product will guide you through entry of the Schedule K-1 from the estate and will ensure that all estate income and deductions are reported in the right places on your Form 1040.

Not sure which to choose? Let's take a look at your personal tax situation to help you decide.

What if you need to file an estate tax return (as opposed to an income tax return for an estate)?

Estate tax returns are for estates with property worth over $2,000,000 on the date of the owner's death. These returns declare all assets owned and debts owed by the decedent at that point. If the value of the estate is over certain thresholds, estate taxes are levied. TurboTax does not support Form 706, which is needed to file an estate tax return.