This is then often given to beneficiaries. A person may or may not have to pay taxes on the money they inherit from a trust. If the money is treated like an inheritance, then it will not be taxed. An individual should consult an attorney in order to determine whether the specific asset in question is taxable. Inheritance money from a trust can be obtained in less than a day or over one year; it will depend on the asset.
If the trustee is the original trustor, then they can choose to remove a beneficiary as long as it is a revocable trust. If it is an irrevocable trust, then they will be unable to remove a beneficiary. For example, the trustee might want to pay a tax preparer for help with the subtrust's income tax return or consult a financial planner for investment advice. The trust document also provides that the trustee of a subtrust is entitled to reasonable compensation for acting as trustee.
The trustee decides what is a reasonable amount; the compensation is paid from the subtrust assets. Someone who is appointed, in the trust document, to be the custodian of trust property inherited by a young beneficiary has about the same management responsibilities as the trustee of a child's subtrust.
The specifics are set out in the Uniform Transfers to Minors Act, as adopted by the particular state's legislature. A custodian, however, does not have to file a separate income tax return. Any income from the property is reported on the beneficiary's own return. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site.
The attorney listings on this site are paid attorney advertising. In some states, the information on this website may be considered a lawyer referral service.
Please reference the Terms of Use and the Supplemental Terms for specific information related to your state. Grow Your Legal Practice. Meet the Editors. After a Grantor Dies. Overview When the grantor, who is also the trustee, dies, the successor trustee named in the Declaration of Trust takes over as trustee.
Duties of a successor trustee of an individual trust: Notify beneficiaries that the trust exists, if necessary. Get an appraisal of valuable trust property. Prepare an Affidavit of Assumption of Duties. Distribute trust property to beneficiaries named in the trust document.
Manage trust property left in a child's subtrust, if any. File the deceased grantor's final income tax returns. This is the responsibility of the executor of the estate. Who Serves as Trustee When the grantor of an individual trust dies, the successor trustee is in charge.
More Than One Trustee If more than one person is named in the trust document as successor trustee, they all serve together. If a Trustee Resigns A trustee can resign at any time by preparing and signing a letter of resignation. Removing a Trustee Very rarely, a beneficiary becomes seriously unhappy with the way a trustee handles trust property. Getting an Appraisal Whoever serves as trustee when a grantor dies should promptly get written appraisals of the market value of all significant trust assets.
This is important for at least two reasons: Whoever inherits property gets a new tax basis in that property: the market value at the date of death.
The new owner needs to know what that market value is to correctly figure tax liability later, when the property is eventually sold. If the executor or trustee needs to file a federal estate tax return, there is a choice of valuing the assets either as of the date of death or six months later. Getting a reliable estimate soon after the death means there will be something to compare it to later. Preparing an Affidavit of Assumption of Duties The successor trustee may be asked to show proof that he or she actually has authority to act on behalf of the trust.
In most states, there isn't any set form for this kind of statement, but it should include: the name of the trust the date the trust was signed, and the name of the successor trustee. Notifying Beneficiaries Trustees must always keep trust beneficiaries informed about administration of the trust. The gift to the trust would be considered complete as of the date of the transfer of the trust assets to the trust by the grantor.
Nevertheless, the income tax benefits of the QRT election, even for two years, suggest that making the election is a worthwhile decision in the majority of cases. If the Section election is made, the electing trust and related estate are treated as constituting separate shares of the estate under Code Section c for purposes of computing DNI and applying the distribution provisions of Code Sections and Once the QRT election is made, only one Form need be filed in the name of the estate, rather than separate returns for the trust and for the estate.
During the election period, the trust has to participate in only one annual fiduciary income tax return filing for the combined trust and estate under the name and identifying number of the estate.
The executor of the related estate is responsible for filing Form for the estate and for all electing trusts. All items of income, deduction and credit for the estate and all electing trusts are combined on the single Form Perhaps the most important and desirable features of the Section election are that once the election has been made, an electing trust may utilize a number of advantages previously limited to estates.
An electing trust may select a fiscal year rather than a calendar year. The electing trust may hold S Corporation stock in accordance with the broader rules allowing estates generally, but not all trusts, to be S Corporation shareholders. An electing trust will be treated as a trust and not as an estate for purposes of the retirement plan required minimum distribution rules of Code Section a 9.
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