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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4013
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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I will be getting a distribution from my recently deceased

Resolved Question:

I will be getting a distribution from my recently deceased mom's irrevocable trust soon. The trustee (also a beneficiary & relative) is asking for a fee, but wants to include that fee in my distribution, then I gift it back to him. Will the total amount of the distribution (including the fee that I gift back to him) be on the K-1 that I get, and will I be responsible for any tax implication on the amount gifted back?
Submitted: 10 months ago.
Category: Tax
Expert:  Lane replied 10 months ago.

Lane :

Hi,

Lane :

your instincts are good,

Lane :

... don't know why they want to include this that way, however, trustee fees should be a deduction for the trust anyway

Lane :

Now, the gift BACK unless it's more than 14,000 would not be taxable from a gift tax perspective

Lane :

it' woulod, however be on the K-1, if the trustee want tot include it on the distribution

Lane :

sorry for the typos it "would,." however ... "wants to" include it ...

Customer:

I believe he wants it this way to avoid his fee as taxable income. I'm afraid if I agree, this will come back to haunt me

Lane :

ahhh, yep .. no it will only haunt you to extent of a little bit of YOUR taxable income

Customer:

I was told that the distribution is not taxable to me since it is from an irrevocable trust. How would this affect my taxable income?

Lane :

but nothing from a gift tax perspective AND only taxable to the extent that the dist IS taxable

Lane :

ok , sorry looks like our posts crossed

Lane :

It depends on what the distribution is from

Lane :

it's not that is from an irrevocable trust it's that the income probably is not taxable as it's coming from principle

Lane :

In THIS scenario it makes ... neither of you wold pay any tax

Customer:

the entire trust was invested in stocks, etc, and yes, the majority of the distribution is from principle. There is only a wee bit of interest income, but (again, as I'm told) not enough for there to be a capital gain. So, there should be no harm in getting a K-1 stating one amount, but I am truly receiving an amount less than what is stated on the K-1

Lane :

:) you're right ... BUT what you gift to someone else is your business

Lane :

and I'm guessing it's not enough to be taxable from a gift tax perspective

Customer:

correct

Customer:

thank you

Lane :

you ARE receiving it ... you're just making a gratuitous gift with part of it

Lane :

YW, .. very astute, you are

Lane :

If this HAS helped, I would appreciate a rating of 3 (OK) or better. (Excellent is ideal)… That’s the only way they pay us here.

Lane :

However, if you need more on this, please come back here, so you won't be charged for another question

Lane :

Lane

Customer:

ok

Lane :

Thanks much

Customer:

I guess my real issue is being concerned that this will haunt me a few years down the road

Customer:

and that I will get fined for back taxes on an amount I never received

Lane :

NO.again your response (should it arise, and I truly believe that it will not) should be the truth ... you gave this to this person and did not have to. I WOULD... most definitely make the trustee give a check for the full amount (that's your documentation) THEN, again, what you do with that money is your business

Lane :

Again you ARE astut if the trustee is asking only to pay you the net amount

Customer:

thank you for letting me bounce this off. I've surfed the web for a week now trying to find an answer. I appreciate your time. Thank you.

Lane :

You're very welcome

Lane :

Let me know if I can help further

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4013
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 2 other Tax Specialists are ready to help you
Expert:  Lane replied 10 months ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

What happens now?

If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.
Expert:  Lane replied 10 months ago.

Hi Kati,

... just checking back in here,as I never saw you come back into the chat.

Again, let me know if you need anything else.

Lane
Expert:  Lane replied 10 months ago.

Thanks so much Katie!

If you’d like to work with me again, just say “For Lane only …” at the beginning of your question, and I’ll get the alert.

Thanks again,

Lane

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