Where do I find trust (irrevocable and complex) distribution amount made to a beneficiary?

GB8 · ‎June 6, 2019

I am the trustee and the beneficiary of one trust and just the trustee on the other (beneficiary is deceased). I understand that I need to fill out 1041 and create K-1, but I don't understand where to get the amounts to fill out the K-1. I have read that if the amount distributed was considered principal, then no distribution needs to be reported. If this is true, how is it determined what is principal and what isn't? I don't see anything from the financial company that holds the trust.

tagteam · ‎June 6, 2019

" I don't see anything from the financial company that holds the trust."

If you did see something at sometime after the beginning of the year, it would have included some form of tax reporting statement.

Generally, though, the assets (principal) are the property that generate the income. If there is no income, then there is generally no filing requirement

The following is a link to a brief summary of the concepts (ignore the "dummies" thing, it's very concise and accurate).

https://www.dummies.com/personal-finance/estate-planning/what-are-a-trusts-principal-and-income/

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GB8 · ‎June 6, 2019

I don't think that I was clear - I have 1099s from the financial company (DIV, INT and B), but nothing indicating distributions. The trusts did have income, but I don't see where to get distribution amounts or if any is considered distribution.

tagteam · ‎June 6, 2019

I am assuming that the financial company is not the trustee of the trust (otherwise you would have received a K-1).

If that is the case, then the 1099s are only reporting income and gains to the trust, not distributions; only the trustee of the trust makes distributions from the trust and those distributions may include principal or income or both.

GB8 · ‎June 6, 2019

Thanks. I am slowly understanding. Okay, so as trustee, I need to keep track of distributions. And distributions are any funds given to beneficiary, not necessarily any funds taken out of the trust? How do you know if it is principal or income?

tagteam · ‎June 6, 2019

If the trust's assets are at any kind of a financial institution, you will receive a tax reporting statement (1099, typically) that will show any income, gains, etc, and only funds/assets that are distributed from the trust are considered to be "distributions" to the beneficiary.

Capital gains typically remain with the trust and are considered part of the corpus (principal) unless the trust instrument and/or local law state differently.

GB8 · ‎June 6, 2019

I'm still confused. Anything that comes out of the trust is a distribution? I think that I have already messed up.

tagteam · ‎June 6, 2019

Yes, but it's important to keep in mind that you are required to report income/gains to the IRS (on Form 1041) for the trust, not necessarily all distributions of principal.

Where do I find trust (irrevocable and complex) distribution amount made to a beneficiary?

Retirement tax questions

Retirement tax questions

Retirement tax questions

Retirement tax questions

Retirement tax questions

Retirement tax questions

Retirement tax questions