Estate Law Questions? Ask an Estate Lawyer.
Am I required to pay taxes on a trust fund disbursement that I received?
This can be a little tricky. If the disbursement is from principal, then you are not taxed on it. If it is from income, then you will likely need to pay income tax on it. Generally, when a trust is established for someone, they may be entitled to receive income and/or principal from the trust. The trust has to file a 1041 fiduciary income tax return that reports the distributions made from the trust. There should always be a K-1 from the trust to the beneficiaries reporting the distributions. You, as a beneficiary, use that K-1 when you file you individual 1040 income tax return. The K-1 will show income and/or principal distributed. If you did not get a K-1, then you need to contact the trustee to find out why not. This is critical for you when filing your taxes.So, you may be required to pay income taxes on any income distributions form the trust. If the trustee failed to provide you with a K-1, then you should him or her responsible for any interest or penalties you may incur. But, if the distribution was from trust principal, you should not have to pay any taxes on it.Hope this answers your question.
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