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Irrevocable Trust withdrawal by Grantor

The irrevocable trust states under a section titled "Payment of income and principal" that the trustee shall pay me (my Dad) as much of the income and principal as I request in writing.

How is this reported on the 1041. Is it considered "other income" and a 1099 is issued? 

In Turbo tax where is the deduction shown. The Trust should not be taxed as my Dad will be.

Any insight is appreciated.

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Level 2

Irrevocable Trust withdrawal by Grantor

When the Irrevocable Trust was set up it gave permission to my Dad to withdraw income or principal by requesting in writing to the trustees. So if he makes a withdrawal how is accounted for. Seems that there have been changes in the tax law since the Trust was setup and it would be best if he just gave the money to the beneficiaries. With the beneficiary being taxed only on their portion of the earned interest as it is less than $250K. 

Thank you for your response. 

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Irrevocable Trust withdrawal by Grantor

When a trust makes a distribution, it deducts the income distributed on its own tax return and issues the beneficiary a tax form called a K-1. The K-1 indicates how much of the beneficiary's distribution is interest income versus principal and, thus, how much the beneficiary is required to claim as taxable income when filing taxes.  

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Level 2

Irrevocable Trust withdrawal by Grantor

Thanks but the funds are not going to a beneficiary they are going to my Dad who set up the Trust as a withdrawal of income. Are you saying in this case because is was a distribution it should be handled in the same manner as the distributions to the beneficiaries? 

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Expert Alumni

Irrevocable Trust withdrawal by Grantor

Is your dad a beneficiary or are you the beneficiary.  It sounds as though you are the beneficiary and you are giving the distribution to your dad.  So you would receive the K-1 as the distribution to a beneficiary.  

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Highlighted
Level 2

Irrevocable Trust withdrawal by Grantor

When the Irrevocable Trust was set up it gave permission to my Dad to withdraw income or principal by requesting in writing to the trustees. So if he makes a withdrawal how is accounted for. Seems that there have been changes in the tax law since the Trust was setup and it would be best if he just gave the money to the beneficiaries. With the beneficiary being taxed only on their portion of the earned interest as it is less than $250K. 

Thank you for your response. 

View solution in original post

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