Question about taking a distribution from a Trust Inherited IRA

[trust812]

I am the Trustee of my late father’s Trust. Since he passed away in September 2024 I have been paying for his partner’s assisted living from the Trust’s corpus. His partner is one of the Beneficiaries of the Trust. This year I am required to take an RMD from her Trust Inherited IRA. As the Trustee if I take the RMD and use it to pay the Assisted Living Facility directly via a check from the Trust on her behalf can I issue her a K-1 under her Social Security Number so that she will pay income taxes on the distribution? Or to issue her a K-1 do I have to send her or her Power of Attorney a Trust check for either of them to use it to pay the Assisted Living? I was hoping that I can pay the Assisted Living Facility from the Trust’s checking account directly and issue them a K-1 without having to use her or her Power of Attorney as “middle men” to pay the Assisted Living facility. Thanks!

[trust812]

Not sure if what AI says is correct but I might have answered my own question.

“AI Overview

A distribution from an estate or trust reported on

Form 1041 Schedule K-1 can be paid directly to a beneficiary or a third party, such as an assisted living facility, for the beneficiary's benefit. The tax treatment and reporting on the Schedule K-1 remain the same in either case. 

Key Points

• Payment Destination is Flexible: The IRS is primarily concerned with the taxability of the distribution, not the physical destination of the funds. A payment made to a third party on behalf of a beneficiary is considered, for tax purposes, to be a payment made to the beneficiary directly.
• Income Distribution Deduction (IDD): The estate or trust takes an income distribution deduction on Form 1041 for the amounts distributed. This shifts the tax burden from the trust/estate to the beneficiary.
• Schedule K-1 Reporting: The amount distributed (whether to the beneficiary's bank account or the assisted living facility) is reported on Schedule K-1 and provided to the beneficiary. The beneficiary then reports this income on their individual tax return (Form 1040).
• Governing Instrument: The fiduciary must ensure the payment is permitted by the terms of the will or trust instrument and applicable local law. The governing document often gives the trustee the power to make payments for the beneficiary's benefit (e.g., for housing, medical care) rather than directly to them, especially if the beneficiary has a disability or other legal limitation.
• Medical Expenses: Payments made to an assisted living facility for medical care may be tax-deductible as medical expenses for the beneficiary on their personal tax return, subject to IRS limitations. The trust cannot take these as a medical expense deduction, but rather as an income distribution deduction. 

In summary, paying the assisted living facility directly for the beneficiary's benefit is a common and acceptable practice, provided it aligns with the trust document, and it is correctly reported on Schedule K-1.”

https://www.google.com/search?q=does+a+1041+distribution+have+to+be+paid+directly+to+a+beneficiary+o...