Trust accounts

[FBN2007]

What is the name of your state (only U.S. law)? MA

When a trust has multiple beneficiaries with different percentages of allocation of assets for the beneficiaries, do separate accounts need to be established under the trust with separate tax ID numbers and therefore separate tax returns for each account? My understanding was the trust that holds the assets needs a tax ID number but I am confused as to whether each account for each beneficiary under the trust also requires one. Then I suppose each account would need a separate name to be reported on the tax return, right?

 

[tranquility]

The trust owns the assets, not the beneficiaries.

 

[FBN2007]

OK, so only one tax ID. I am the trustee with myself and brother as beneficiaries. I have total discretion as to how much of the trust assets and any income to distribute to my brother who is unable to manage money. There is no provision for his health, education, maintenance, and support. They gave me total discretion. If I want to distribute income and any capital gains in the trust in order to pay a lower tax rate (lower than the trust rate) but I don't want to distribute to him, can I just distribute to myself and then allocate to him what would have been his portion of the interest and or capital gains from the remaining principal? I want to be fair but do not want to distribute to him now due to his continuing problems managing money.

 

[LdiJ]

OK, so only one tax ID. I am the trustee with myself and brother as beneficiaries. I have total discretion as to how much of the trust assets and any income to distribute to my brother who is unable to manage money. There is no provision for his health, education, maintenance, and support. They gave me total discretion. If I want to distribute income and any capital gains in the trust in order to pay a lower tax rate (lower than the trust rate) but I don't want to distribute to him, can I just distribute to myself and then allocate to him what would have been his portion of the interest and or capital gains from the remaining principal? I want to be fair but do not want to distribute to him now due to his continuing problems managing money.

You probably need to sit down with a tax professional because you don't understand how it works at all. The tax aspect of the trust is separate from the distribution aspect of the trust.

Depending on the type of trust, the trust either pays the tax itself, whether it distributes or not to the beneficiaries, or it passes the taxable income through to the beneficiaries on a Schedule K1, whether it distributes to the beneficiaries or not. That is also not something that the Trustee decides from year to year, its one way forever...based on the type of trust.

If you distribution NO money to your brother via the trust, then you give him grounds to challenge you as trustee. Now, that doesn't mean that you necessarily have to let him have the money directly, as a lump sum, but it does mean that you either need to pay some bills for him or something. You cannot just hoard the money and not let him have use of any of it because you believe he cannot manage money.

 

[TrustUser]

i agree that you need to sit down with someone who can explain your job to you, so that you can understand what is expected of you.

 

[tranquility]

I hate the unfettered discretion of distribution. There is a problem(s) here. See an attorney AND a tax professional. A couple of experts need to review the trust language.