Co-Trustees of my uncle's estate, shared a portion of their fee with me … is this portion of their fee given to me as cash, taxable?

[heffner-sc]

the cash to me was after all beneficiaries had received their shares, per the Trust instructions?

[Bsch4477]

The fact that you were paid in cash doesn’t affect the taxable nature of the income. If it was paid to you in recognition of your work as a trustee it is taxable. 

[heffner-sc]

to be clear, I was not a Trustee, I was a successor Trustee, but without that role materializing, I was (I believe) simply a beneficiary) - does that change the tax liability  you are suggesting.   thanks ...

[Opus 17]

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@heffner-sc wrote:

to be clear, I was not a Trustee, I was a successor Trustee, but without that role materializing, I was (I believe) simply a beneficiary) - does that change the tax liability  you are suggesting.   thanks ...

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In general, the beneficiary of a deceased does not pay income tax on a cash inheritance.  A trustee may be required to declare income received for services rendered.

I don't think we have a clear picture of why you were paid.  

If the will said "$10,000 to each of my 5 children, with any leftovers going to Bob" then Bob is also a beneficiary, even if Bob is not a relative.  

Or, suppose the will said, my trustees get 10% for management fees, and everything else is divided between my children Betty and Bob.  The trustees decide 10% is too much, so they kick back some money to Bob but not Betty.  That could be a gift from the trustees, or it could be part of the bequest, either way it's not taxable to Bob (although it might be improper for the trustees to favor one beneficiary over another).

If you performed no services as a trustee, I can't think of how this would be taxable, no matter what the real reason is for the payment.  But you may need advice from your own hired professional who can review documents.

[heffner-sc]

my conclusion is pretty much similar to yours ... this was after first, I was informed by the trustee that while his 'fee' was taxable, mine would not be.  However, later after discussing with another CPA, apparently they said that portion of the trustee's fee (which is free to use anyway that trustee believes supportable) sent to me, was now taxable ... my position, as a beneficiary, that doesn't change tax categories under the scenario I've presented.  thanks again -

[Opus 17]

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@heffner-sc wrote:

my conclusion is pretty much similar to yours ... this was after first, I was informed by the trustee that while his 'fee' was taxable, mine would not be.  However, later after discussing with another CPA, apparently they said that portion of the trustee's fee (which is free to use anyway that trustee believes supportable) sent to me, was now taxable ... my position, as a beneficiary, that doesn't change tax categories under the scenario I've presented.  thanks again -

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I think that, if the trustee rebated part of the fee because they feel they didn't earn it, that just becomes part of the residue of the estate.  If it's a large amount, you may want a professional opinion.  If the trustee issues a tax document (like a 1099-NEC or 1099-MISC) there are ways to deal with it on your return so it won't be taxable, but the IRS may ask questions.  But that may just be borrowing trouble that will never come. 

[Anonymous_]

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@heffner-sc wrote:

.....that portion of the trustee's fee (which is free to use anyway that trustee believes supportable)...

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If the trustee earned the fee and then decided to give you part of that fee out of nothing more than love and affection, then that would be a gift from the trustee to you.

I wholeheartedly agree that you should consult with a local tax professional in that respect and disregard any advice or information from those who are not aware that trusts have trustees while estates do not.

[xmasbaby0]

Please clarify----were YOU one of the co-trustees?   Or were you just the recipient of an amount that was given to you as a gift by one of the trustees who handled the estate and got paid for it?   If it was a gift, then you do not pay tax on a gift, or even enter anything about a gift on your tax return.

[heffner-sc]

here's the final piece after receiving this evening, an explanation by one of the two trustee as to why his CPA said my portion would be taxable.   Since all beneficiaries could not be treated differently, but, since I was also a successor trustee (as well as a beneficiary), the CPA concluded/reasoned, I could be paid a portion of the Trustee's fee in my capacity as a successor since we all were actively working toward the benefit of the estate  and, no longer considered just beneficiaries during my uncle's last 3-4 years while living.