THANK YOU so much for your detailed reply!
I had a few clarifying questions if I may.
1. So, if my WDT is invested all in stock index and earns $20,000 in unrealized gain one year. If my brother leaves $8,000 alone and sells $12,000 of the stock (realizing the gain) and distributes that $12,000 to me - then based on your answers the trust would declare no income that year and I personally would declare $12,000 of 1040 income on my personal return?
If that is correct, then do I declare it as capital gains or income?
And do I use the tax brackets for individuals rather than for trusts?
In other words, let's say I'm supposed to claim it as capital gains and with single filers, the 0% rate now applies to incomes up to $47,025 in 2024. So, would I pay $0 tax on the $12,000 distribution?
2. I totally understand capital gains from stocks and owing no tax if those gains aren't yet realized. However, let's say my brother invests some of the WDT into bonds, CDs or a savings account.
Is interest from bonds, CDs, high yield savings account considered capital gains or income?
Thanks!
