Hi, @Chas R , thanks for your questions!
1) "Should future distributions/ interest/ dividends be reported as income on our joint income tax?" Dividends on stocks you hold should be reported to you on Form 1099-DIV, which should be included on your tax return as taxable income. Capital gains or losses on stocks you sell should be reported on Forms 1099-B or 1099-COMP, and should also be reported. However, your basis in these stocks may be affected by the fact that it was inherited, not purchased. This article goes into more detail.
2) "Can her portion of this trust be used to establish a new trust with our grandchildren as owners?" This is not a tax question, so is outside of our scope. Please consult with a financial planner or attorney.
3) "If so, how should earnings be reported?" You may have to file a 1041 tax return for the trust, "U.S. Income Tax Return for Estates and Trusts".
Hope this helps!
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
