Paying Taxes on Child's Trust

A dear friend of mine died in 1997 and left $25,000.00 for my son's education. My son is only ten so it will be some time before we have access to the money. In the meantime the bank's trust department handles all transactions involving this money. Most of it is in mutual funds. I am named as the custodian due to my child's age. He will get the lump sum when he is of college age. If he decides not to go to college he will get the entire amount when he is 25. I received in the mail last week an Agency Letter, a 1099-DIV, a 1099-INT and a 1099-B for this money. Do I have to pay taxes on money that we have no access to and if I do, am I in trouble for the years prior to 2001 that I haven't even known to pay taxes on?

DO I HAVE TO PAY TAXES ON MONEY THAT WE HAVE NO ACCESS TO
If you actually received distributions from the trust, then you PROBABLY have to pay tax on the amount. However, it sounds like you did not receive any distributions; therefore, you PROBABLY do not have to pay the tax on the amounts. In either case, it depends on how the bank handled the trust. They could have set it up so that you pay the tax on the annual income, or so the trust itself pays the tax.

To find out, ask the bank. As the trustee, they should give you any tax help you need. And if it was a mistake, they can correct it.


AND IF I DO, AM I IN TROUBLE FOR THE YEARS PRIOR TO 2001 THAT I HAVEN'T EVEN KNOWN TO PAY TAXES ON?
If the bank sent you no 1099s or other notices of taxable income, then you are in no trouble about those years.

Oops! I Have Received 1099

Actually, I have received 1099's prior to this, but I guess in my own head I truly believed I didn't have to pay if we weren't receiving anything right now. Now, how much trouble am I in? What should I do?

As I said above, what you must do depends on how the bank set up the trust. You have to talk to the bank about what to do.