My mother has recently passed, we established a trust 14…

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My mother has recently passed, we established a trust 14…

My mother has recently passed...

My mother has recently passed, we established a trust 14 years ago when my father died. There are tax deferred IRA and annuity assets. The IRA is her rollover retirement assets. The annuities are life insurance proceeds from policies on my fathers life plus interest earnings accrued since his death. Should these assets, which were in her Social Security Number but titled to the trust, be placed in the trust and then distributed to beneficiaries (myself and siblings)? Or should I try to have the investment firm and insurers issue checks direct to beneficiaries? I'm concerned about where taxes are applied, would acquiring a TIN for the trust require the trust to pay the income taxes on the deferred assets before distribution? Can I take the assets into the trust and then distribute and have the income tax be applied to each beneficiary as individuals?

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Customer reply replied 3 years ago

The will does read that upon death all property is to be added to the trust, so it appears we do have a pour over will. So if the insurance company deposits monies to the trust, but then all assets and income are passed to beneficiaries then the trust is not taxed on the difference between current balance and the basis, but each beneficiary would be taxed on their taxable portion and no need to file tax return for the trust?

Estate Lawyer: Barrister, Attorney replied 3 years ago

Ok, then that would apply to anything that was in mother's name when she passed that didn't have a specific beneficiary already named.

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So if the IRA and annuities already have beneficiaries names, those funds will go directly to the named beneficiary, just like a life insurance policy.

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So if the insurance company deposits monies to the trust, but then all assets and income are passed to beneficiaries then the trust is not taxed on the difference between current balance and the basis, but each beneficiary would be taxed on their taxable portion and no need to file tax return for the trust?

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Correct. As long as any income is "passed through" to the beneficiaries, then the trust doesn't pay taxes on that income. The trustee would file a K-1 with the IRS, which is a form showing what income is passing through to each beneficiary, and send that to each beneficiary so they can claim any income on their taxes.

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But again, those assets should already have beneficiaries named directly so they shouldn't go into the estate or the trust in the first place.

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thanks

Barrister

Barrister, Attorney

Category: Estate Law

Satisfied Customers: 50,981

Experience: 19 yrs estate law, real estate. Wills/Trusts/Probate

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Customer reply replied 3 years ago

Thank you

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Estate Lawyer: Barrister, Attorney replied 3 years ago · Answer 1

Hello and welcome! My name is ***** ***** I am a licensed attorney who will try my very best to help with your situation or get you to someone who can. There may be a slight delay in my responses as I research statutes or ordinances and type out an answer or reply,but rest assured, I am working on your question.

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Should these assets, which were in her Social Security Number but titled to the trust, be placed in the trust and then distributed to beneficiaries (myself and siblings)?

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Those assets should have their own specific beneficiaries named in the instruments themselves. So they wouldn't go into the trust or estate, but rather pass directly to whoever was named as a beneficiary on those accounts. It would only go into the trust if the trust was specifically named as the beneficiary.

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When someone passes with assets in their name, the only way they can be added to the trust after that is if the person had a "pour over will" which directs that any remaining assets in their name be "poured over" into the trust for disbursement according to the terms of the trust.

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As for a TIN, you would need to obtain one now, since it is irrevocable, and file taxes only if the trust receives over $600 in income that is not passed through to the beneficiaries.

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So if something isn't in the trust already, and there is no pour over will, then it can't be added after mother's passing.

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thanks

Barrister

My mother has recently passed, we established a trust 14…

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