Quarterly payments as a beneficiary/trustee

[TheVargle]

My wife inherited 2 trusts a few years ago, but it has never been completely clear to me who owes taxes on what. She is (currently) both the trustee and beneficiary. I am working on our 1040-ES.

- Do we owe quarterly taxes on the trust(s)?

- If so, on what amount? Net change? Withdrawals? Dividends, interest, and other income?

I'd appreciate any help or guidance.

[Anonymous_ · Accepted solution]

You absolutely must consult, in-person, with an estate planning attorney who can review the relevant documents.

If your wife is the sole trustee and sole beneficiary, with no successors or remaindermen, and has the power to distribute the entire corpus to herself, has a 5x5 power, et al, then the trust could very well be considered a grantor trust (part or full) which is disregarded for federal income tax purposes.

You need to consult with a local professional for this scenario.

[TheVargle]

Thank you for your response. We did try that...once. I have no idea if they handled the K1 appropriately, but they managed to screw up the rest of my taxes. Are there any publications you'd recommend I look at for more information about trusts?

[Anonymous_]

@TheVargle 

There a ton of publications and books on the subject. One of the problems is that many cover only trust and estate law while others only cover trust and estate taxation; you probably want a book that covers both.

Check the link to Amazon below and read the descriptions. Hopefully, you can find a book that covers both the basics of trust law and also taxation. Note, however, that you still have to interpret the document that created the trust as well as any ancillary documents and doing so may be challenging with only a basic understanding of the subject matter.

https://www.amazon.com/Best-Sellers-Books-Estates-Trusts-Law/zgbs/books/10869