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I am a trustee for a trust. The primary beneficiary passed…

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I am a trustee...

I am a trustee for a trust. The primary beneficiary passed away last year. Her will calls for the trust assets to be distributed to her children. For various reasons, the trust assets were not distributed last year and probably will not be distributed to the heirs for at least another two months. The trust generates significant income, none of which has been distributed either.

Accountant's Assistant: The Accountant will know how to help. Is there anything else the Accountant should be aware of?

I paid estimated taxes for last year and will file a trust tax return. The family lawyer says I do not need to pay estimated taxes on the trust income this year, and that the assets and income can just be distributed with the heirs then paying the tax. Assume the trust is dissolved May 1. Doesn't the trust have to make 1st quarter estimated taxes and pay tax on the first quarter earnings, which will be at least $250K

Submitted: 1 month ago.Category: Tax
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Answered in 28 minutes by:
3/16/2018
Tax Professional: Lev, Tax Advisor replied 1 month ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,687
Experience: Taxes, Immigration, Labor Relations
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The Will has no effect over the trust.

The purpose of the trust - to bypass the will and corresponding probate - so the trustee will follow the direction of the deceased.

When the beneficiary dies - all distributions from the trust due to that beneficiary will go to the estate of that person unless the trust document directed differently.

The trust may be required to distribute all income to beneficiaries - please verify what trust's documents say regarding that?
If yes - K1's are issued to beneficiaries anyway even no distribution were made.

If no - the trust will be liable for income taxes on that income.

In most situations trust's tax rages are higher than for individual beneficiaries - so I suggest to verify your options.

Estimated taxes are generally not needed if the trust had low or none tax liability in prior year OR if it will not expect tax liability in the current year.

If the trust will be dissolved any tax liability will be passed to beneficiaries (if you will have any) and estimate payments are not needed.

If you do estimated payments - you will be able to pass these to beneficiaries as well on K1.

So the money will not be "lost"

Let me know if any clarification needed,

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Tax Professional: Lev, Tax Advisor replied 1 month ago

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Experts are ONLY credited when answers are rated positively.

If you still have any doubts, need clarification - please be sure to ask.

I am here to help you with all Social Security / Tax related issues.

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