Who pays taxes after receiving money from trust?
1 answer
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Last updated: Jan 21, 2012
Q
Who pays tax on the money you receive from an estate in trust, the individual for whom the money is intended, or the person that accepts the money on his or her behalf? Is the money received from an estate in trust tax-exempt?
A
Liza Hanks is the founder and owner of FamilyWorks Estate Planning, a law firm with offices in Campbell and Los Altos, California, and...
50% helpful
Accounting for trust income tax can be really complicated.
The basic rule is that, for distributions of trust income, the income tax is paid, up to a certain point, by the person who receives the distribution at his or her individual income tax rates.
After a certain cut-off point, the trust pays the income tax due at its tax rate, which is almost always higher than an individual's tax rate.
Distributions of trust principal are not subject to the income tax.
To get specific help with your situation, consider consulting someone experienced in fiduciary accounting, which is what trust accounting is called.
