QUESTION
What are the tax liabilities of an irrevocable trust fund? How?
Asked on Sep 16th, 2015 on Taxation - Michigan
More details to this question:
I have an irrevocable trust set up along with my mother and son. My mother has placed around, though never exceeding, $10,000 dollars of gift money into this account per year. I am the trustee of the irrevocable trust, which is being overseen by a brokerage firm. What tax liabilities will I incur if I release an amount around $40,000 dollars in one sum to my son from the trust?
3 ANSWERS
Commercial & Bankruptcy Law Attorney serving Powell, OH
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Ronald K. Nims
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The taxation of a trust distribution is determined by the source of the funds in the trust. 1. All of the trust's taxable income is considered to be distributed first. 2. Distributions in excess of trust income is considered nontaxable principal. So if the trust earned $15,000 in 2015 and distributed $40,000. Your son would have $15,000 in taxable income and $25,000 tax free distribution of principal.
Answered on Sep 21st, 2015 at 4:02 AM
Chapter 7 Bankruptcy Attorney serving Lisle, IL
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Mankus & Marchan, Ltd.
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If the money in the trust is a gift, there is no tax to the son. However, the trust document needs to be examined to be certain.
Answered on Sep 17th, 2015 at 10:39 AM
Appellate Attorney serving Grosse Pointe Farms, MI
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Musilli Brennan Associates, PLLC
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Without the details I cannot tell. Seek counsel with the details.
Answered on Sep 16th, 2015 at 12:03 PM