Revocable trust distributions

[Jozef_G]

I am the Grantor and Trustee of a Revocable Trust with $150k in assets that was funded by my dad who past away last month. I will be distributing $30k to myself and each of my four siblings this year. If my research is accurate, I will not owe taxes on the money that I receive since technically it is my money as the Grantor. However, I'm finding mixed info on the tax liability for the money given to my siblings. Can anyone tell me if there would be a tax liability for disbursement to my siblings and if there is a liability then who would be responsible for paying it?

[Hi Palms]

Sorry for your loss.

Threshold question is whose trust is this and what is your relationship to it?

If this was your father's revocable trust that he funded while he was alive, then he is the grantor/former trustee and the trust became irrevocable on his passing and you became successor trustee (i.e. you're not the grantor in that scenario).

There should be no tax liability for you, your siblings, or the trust if you're just distributing corpus....the principal of the trust. If there are interest, dividends, capital gains or other income, then there may be tax liability when those income items are distributed.

[dmertz]

I think you have some misunderstanding about the nature of this trust.  I suspect that your father had a revocable living trust, in which case your father would have been the grantor, that trust became irrevocable upon his death and that you are the successor trustee wishing to distribute assets to you and your siblings as beneficiaries of this trust.  The fact that you mention distributing anything from this trust seems to imply that this is the case.

You would probably benefit from consulting a trust attorney.

[Jozef_G]

@Hi Palms @dmertz 

Thank you for your replies. I've already reached out to the lawyer who wrote up the Trust but he is asking for a decent bit of change just to discuss it. It appears I was wrong in assuming the $10K my dad paid to write up the Trust entitled me to at least some follow-up question. It's not a money issue since the Trust would pay for the consultation not me personally, it is more a matter of principle. I hate paying for the same thing twice. So with that being said, I am including a few more details so hopefully you can offer more guidance.

When my father created, and financed, the trust my mother was still alive and his primary goal was to insure that she would be taken care of. She was in the early stages of Dementia at the time and my father was worried that if he died that she would not be able to handle the finances so he had a lawyer create a Revocable Trust in my name with specific instructions that the funds would be used to take care of him and my mom until they passed. Unfortunately his concerns were for naught as my mother died six years ago. I asked him if he wanted to terminate the trust at that time but he decided to keep it in place in case he ever got to the point that he couldn't handle his own finances. It was his wish that the funds be dispersed within six months of his death so I'm am just following his wishes but I don't want to be stuck with a tax bill for all of the money in the trust. The Trust states that any expenses would be paid by it so I need to know if I should withhold a portion of the distribution to pay for the taxes, if I am going to be responsible for them. It's not that I don't trust my brother and sisters to help with the bill if necessary, I just think it would be easier to resolve the issue now instead of waiting six months.

[NCperson]

@Jozef_G who is specifically named in the Trust as beneficiaries? How did the lawyer handle the possibility that neither your mother or father consumed the money?  Please read the trust and let us know.  

Also, who is the Trustee of the trust? you? 

You are NOT the "grantor", that was your father. At this point it doesn't matter who was the grantor, what is important is who is the Trustee and who are the beneficiaries.  

[Hi Palms]

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@Jozef_G wrote:

I hate paying for the same thing twice. So with that being said, I am including a few more details so hopefully you can offer more guidance

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I understand but it is not exactly paying for the same thing twice. The $10k your father paid appears to have been for the drafting of the instrument while any funds you would expend (paid for by the trsut, itself) would be for advice relating to the effect of the language in the trust based upon eventualities that actually occurred.

You also, as trustee, have a fidicuiary duty to the beneficiaries to get what happens next (i.e., how you handle this scenario) right. That duty would involve using a local, qualiffied professional to review the trust lanaguage and advise you as to how to proceed and the proper course of action. Seeking advice on the likes of an internet board would not satisfy that duty.