Trust Accounting

[kmbarr]

My parents have set up trusts for my children in order to begin the process of transfering the family farm to them and avoid estate taxes. I am the trustee. Do we need to establish new taxpayer I.D.'s for these trusts (as opposed to reporting any income under the kids SSN's)? If so, what rules govern tax reporting on the trusts? I need an overview of the tax laws involved and perhaps a reference for a good book on the subject. I am a finance professional, so if I am pointed in the right direction, I feel like I should be able to manage these trusts with few problems.

 

[dmode101]

It depends on the terms of the trusts. Does income get paid out or is it accumulated in the trust? Are income distributions mandatory or discretionary, and to whom are they made? Unless the trust can be treated as a "grantor trust" then you will need to get an ID# and file a Form 1041 annually. Check out IRC Subchapter J -- Code Sections 641 through 692.

 

[loku]

Trust taxation

I agree with all that illinoisestateplan.com said about the trust.

I would like to add that a good place to start would be the Instructions to Form 1041 The US Income Tax Return for Estates and Trusts. The Instructions are quite comprehensive (36 pages), and they are clearly written. They probably include everything you will have to know about trust taxation. You can download the Instructions (and the form itself) for free at the IRS site at: http://www.irs.ustreas.gov/forms_pubs/index.html.