This is a question about a complex trust which does not set requirements for distributing earnings . This is the 2nd year of the trust (gst) so this is all very new to me. The first issue is that Turbo Tax on my PC asks about distributions and once I say that yes I took distributions it decides that the earnings must be distributed and taxes paid via my 1040. I understand that typically that is how things are done, but not true in the case of this trust. I am allowed to receive as much or as little from the trust as I and my co-trustee decide. So the amount distributed is not directly related in any way to the amount of income for the year.
I feel like last year the question was " is there any distribution ALLOCABLE to the beneficiary" which made sense to me because that meant the beneficiary paid the tax. I said NO because I want the trust to pay the taxes prior to taking a distribution.
So the question is how to show the beneficiary took distributions but not allocate the taxes to the beneficiary and not tie the distribution to the income of the trust? In other words how do I remain flexible in taking or not taking distributions, and remain flexible in distributing from already taxed dollars and not being forced to take untaxed dollars as turbo tax wants to do?
