Inheritance from Revocable Trust

[bcanterbury85]

My grandfather passed away years ago and any assets set to be distributed to beneficiaries went into his revocable trust.  The trust is not set to be broken up and transferred to the beneficiaries until a trigger date occurs.  When that date occurs and the trust pieces are transferred to the beneficiaries, are the assets transferred within it considered taxable income?  We are having trouble understanding whether it's considered inheritance or not since the transfer is coming from the trust and not an estate.  If some of the assets are the form of investment portfolios, are the earnings on those taxable from the beneficiaries perspective from the time the investment was bought within the trust or only from the time the transfer occurred to the beneficiary?

[andrea_cpa]

Hi, that is a great question.  Cash, stock and real estate are not taxed as income when you inherit them, but you could have taxable gains when you sell the stock or real estate.  This link has great information that may answer your questions about inheriting trust assets: https://turbotax.intuit.com/tax-tips/estates/estates-and-trusts/L9f1Fywy8

[Anonymous_]

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@bcanterbury85 wrote:

 If some of the assets are the form of investment portfolios, are the earnings on those taxable from the beneficiaries perspective from the time the investment was bought within the trust or only from the time the transfer occurred to the beneficiary?

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If the assets were purchased by your grandfather prior to his passing, then in the typical scenario the assets would be marked to their fair market value on the date the trust became irrevocable (i.e., on the date of his death). 

Income earned after that date (e.g., interest, dividends, capital gains), during the time period that the assets remain within the trust are taxable to the trust, itself, or the beneficiaries if/when that income is passed through to the beneficiaries on K-1s (1041).