The Section 645 election is an IRS election that lets the trustee of a decedent’s revocable trust and the executor of the decedent’s estate treat those two entities as a single taxpayer on one Form 1041 during estate administration. It is made by filing Form 8855 by the due date, including extensions, of the estate’s first income tax return, and once filed it cannot be undone.1Office of the Law Revision Counsel. 26 USC 645 – Certain Revocable Trusts Treated as Part of Estate The payoff is access to tax rules that apply to estates but not to standalone trusts, including a fiscal year, a larger exemption, a two-year holiday from estimated payments, and continued eligibility to hold S corporation stock.
What the Combined Entity Looks Like on the Return
With the election in place, the trust stops filing its own Form 1041 for the length of the election period. All income, deductions, and credits from both the trust and the estate go on a single fiduciary return filed under the estate’s EIN. The election reaches back to the date of death, so the first combined return covers the period from death through the end of the tax year the fiduciaries choose.
If a probate estate has been opened, the combined entity uses the EIN already assigned to that estate. If the decedent left everything in the revocable trust and no probate was opened, the trust itself acts as the electing estate and the trustee obtains a new EIN for the combined entity.
Who Can Make the Election
Two things have to be true. First, the trust has to be a “qualified revocable trust,” meaning the decedent was treated as its owner immediately before death because the decedent held the power to revoke it. A standard revocable living trust almost always meets this test because the grantor keeps full power to amend or revoke it during life.2Office of the Law Revision Counsel. 26 USC 676 – Power to Revoke
Second, there has to be a “related estate” — the decedent’s probate estate with an appointed executor or personal representative. If no probate estate exists because everything passed through the trust, the election can still be made. In that case the QRT steps into the role of the estate and the trustee handles filing without an executor.3eCFR. 26 CFR 1.645-1 – Election by Certain Revocable Trusts to Be Treated as Part of Estate
Irrevocable trusts, life-insurance-only trusts the decedent could not revoke, and trusts the decedent did not own for income tax purposes at death do not qualify. Silence in the file on other trust types means silence here: the QRT definition is the gate.
How to File Form 8855
The election is made on Form 8855, Election to Treat a Qualified Revocable Trust as Part of an Estate.4Internal Revenue Service. About Form 8855 Both the executor and the trustee sign. If there is no executor, the trustee signs alone and indicates on the form that no executor exists and that the QRT is acting as the electing estate.
The deadline is the due date, including extensions, of the first Form 1041 for the related estate. That deadline applies even if the estate’s first year does not generate enough income to require a return.3eCFR. 26 CFR 1.645-1 – Election by Certain Revocable Trusts to Be Treated as Part of Estate There is no late-filing relief. Miss the date and the election is gone.
Because the election cannot be revoked once made, the decision to file deserves a careful look at whether the estate-level benefits below actually apply to the situation.1Office of the Law Revision Counsel. 26 USC 645 – Certain Revocable Trusts Treated as Part of Estate
Why Fiduciaries Make the Election
Some of the benefits are small on their own. Together, and over a multi-year administration, they add up.
A Fiscal Year Instead of a Calendar Year
A non-grantor trust must use a calendar year ending December 31. An estate can pick any fiscal year ending on the last day of a month, and the combined entity inherits that flexibility. Choosing the right year-end can defer income recognition by up to eleven months, which matters when large asset sales or distributions are expected shortly after death.
A Larger Exemption
An estate gets a $600 deduction in lieu of a personal exemption. A simple trust gets $300 and a complex trust gets $100.5Office of the Law Revision Counsel. 26 USC 642 – Special Rules for Credits and Deductions The dollar gap is modest per year but reflects a broader pattern: the combined entity is treated as the estate across the fiduciary tax rules.
No Estimated Payments for Two Years
An estate does not have to make estimated income tax payments for any taxable year ending within two years of the decedent’s death.6Office of the Law Revision Counsel. 26 USC 6654 – Failure by Individual to Pay Estimated Income Tax A trust that becomes non-grantor at death would owe quarterly estimates from day one. The combined entity gets that first two-year window off, which eases cash flow while assets are being gathered and appraised.
Full Charitable Deduction When the Instrument Allows It
The combined entity can take an unlimited deduction for gross income paid to a qualifying charity, provided the governing instrument authorizes the payment. This deduction under Section 642(c) replaces the percentage-of-income limits that apply to individuals.5Office of the Law Revision Counsel. 26 USC 642 – Special Rules for Credits and Deductions The fiduciary cannot simply choose to donate and deduct; the will or trust document has to authorize the payment.
Active Participation in Rental Real Estate
A decedent’s estate is treated as actively participating in rental real estate for tax years ending within two years of death, provided the decedent would have met the active participation test in the year of death. A QRT that makes the Section 645 election gets the same treatment and can use the rental real estate loss allowance that would otherwise require a living, active individual.7Internal Revenue Service. Publication 925 (2025), Passive Activity and At-Risk Rules
Holding S Corporation Stock Without Losing the S Election
This is the benefit that can prevent a genuine tax disaster. An estate can hold S corporation stock for the entire administration period. A former grantor trust gets only a two-year window as an eligible S corporation shareholder after the owner dies.8Office of the Law Revision Counsel. 26 USC 1361 – S Corporation Defined With the Section 645 election, the combined entity remains an eligible shareholder for the full election period, which can run well past that two-year trust cutoff. Without the election, the trust would need to convert to a QSST or ESBT, or distribute the stock, before the two-year mark, or the corporation risks losing its S status.
How Long the Combined Entity Lasts
The election period is temporary. The end date depends on whether a federal estate tax return is required.
- No Form 706 required: the election period ends two years after the date of death. For decedents dying in 2026, Form 706 is required only if the gross estate exceeds $15,000,000, so most estates use the two-year date.1Office of the Law Revision Counsel. 26 USC 645 – Certain Revocable Trusts Treated as Part of Estate9Internal Revenue Service. Frequently Asked Questions on Estate Taxes
- Form 706 required: the election period ends six months after the final determination of the estate tax liability. Final determination is the earliest of the IRS closing letter, expiration of the assessment statute of limitations, or resolution of any litigation. For complex or audited estates, the election period can run well past two years.1Office of the Law Revision Counsel. 26 USC 645 – Certain Revocable Trusts Treated as Part of Estate
What Happens When the Election Period Ends
On the day after the election period ends, the trust and the estate (if it still exists) become separate taxpayers again. The Form 1041 for the year of termination reports the trust’s income and deductions through the last day of the election period and takes a deduction for a deemed distribution of the trust’s share to the now-separate trust.10GovInfo. 26 CFR 1.645-1 – Election by Certain Revocable Trusts to Be Treated as Part of Estate
Going forward, the trust generally needs a new EIN. If the estate continues after the election ends, it keeps its existing EIN. If there was no executor and the QRT had been acting as the estate, the trust must obtain a new EIN if it continues in existence.10GovInfo. 26 CFR 1.645-1 – Election by Certain Revocable Trusts to Be Treated as Part of Estate The trust then resumes filing its own Form 1041 as a non-grantor trust on a calendar year with the lower trust exemption. Trustees who got used to the estate’s more favorable rules during the election sometimes overlook this shift, and the trust’s first standalone return is where compliance errors tend to show up.
One boundary worth flagging: not every state follows the Section 645 election. Even during the federal election period, the trust and estate may have to file separate state fiduciary returns depending on the jurisdiction. Checking with the state taxing authority before filing Form 8855 avoids state-level surprises later.