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jgordosea, Enrolled Agent
Category: Tax
Satisfied Customers: 3161
Experience:  I've prepared all types of taxes since 1987.
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I am a trustee for my disabled sons account his ...

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I am a trustee for my disabled sons account his money is invested,a monthy stipid is paid to me per month at 2000.00 tax free,and then his account also pays me for his daily living expenses of 3630.00.I know I must claim the 2000.00 as income and he is able to write this off from his own taxes,but what about the 3630.00 for daily living expenses per month is that to be claimed as income to me >how dos this work?thanks


The amounts that the trust pays for your son's expenses are not income to you and the payments to you for administration are income to you. This payment to you is an expense of the trust. The trust will file a tax return (and is required if it has more than $600 of income). Even if not required, it may be beneficial to at least prepare (and probably file) a return to have a record of the transactions.

The distributions to your son may cause some of the trust income to be taxable to your son; but he should receive a Form K-1 to report the amoutns to include on his return if he is required to file.

The problem may arise of keeping separate the two types of payments. My suggestion is that you keep a separate account for the amounts distributed for your son's expenses and to repay you for the amounts you spend on him or have payments made directly from that account for his care and support. That way, there is no question what is and is not your income and how the funds were spent.

As both the paid administrator and the caretaker of your son you can avoid any question of using his money for yourself by keeping separate acccounts and preparing a return.

I hope this helps for separating the paymnets from the trust.




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