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Trusts & Estates Law/tax treatment of distribution of trust assets

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Question
I am trustee, a lifetime beneficiary, and have a special power of appointment of a complex trust (consisting of stocks and bonds) established by my late husband.  Our two sons are the remaindermen.  As specifically authorized in the trust document, I distributed 50,000 from the trust assets to each son so that they could buy homes. In other words, I sold trust-owned stock and distributed the proceeds to my sons so that they could buy homes.  I thought that there would be no tax consequences, but now I'm uncertain about the tax consequences.  Do I need to report the distributions as gifts from me personally?   Since there was no distribution of trust income, I don't think I need to issue Form K1 to my sons or report the distributions on the trust income tax return. Is that right?

Answer
Joan,

You are going to need a cpa to file the annual trust returns so that is who I would ask.  There are go gift taxes due until you reach your lifetime maximum which I believe to be $1.2Mil. There still is some confusion about this.  See NY Times article here:  http://www.nytimes.com/2011/02/13/business/yourtaxes/13estate.html?_r=0

There are tax consequences to selling stocks inside the trust depending on their basis.  Perhaps there was a loss but you need to find out what the basis is - probably the value on the date of your husband's death.  As for the sons some trust pay they taxes and some tax the beneficiaries.  I haven't seen yours so I don't know.  I think it is time to consult a tax specialist (which I am not) in your area.  

I hope this helps.

David Disraeli
www.pcfo.net

Trusts & Estates Law

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David Disraeli

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I can answer general questions about estate planning and trusts. I can also answer questions about estate tax reduction and advanced charitable giving, family partnerships and asset protection. I may have already answered your question here: www.lifeplanblog.com or here www.pcfo.net

Experience

I have worked for 24 years with clients and their attorneys to formulate estate plans to meet client goals. I have found many mistakes made by client attorneys and were able to have them corrected. I focus on making sure that beneficiaries are protected from current or future spouses and lawsuits so the wealth stays in the family. I have also published a book on Aging Parents which can be found on Amazon https://www.amazon.com/dp/B003VP9WTG

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President and founder of The Personal CFO Inc.

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www.pcfo.net www.lifeplanblog.com

Education/Credentials
Certified Financial Planner 1994

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