2

My girlfriend (a legal resident of the United States) is the beneficiary of a trust and she withdrew the money this year. Essentially, her father put money into a trust which she was not allowed to use until she was 18 years old or older. Her father passed away some years ago and, to our knowledge, this trust has not grossed any income, nor have we received any forms in the mail specifying tax information for this trust. Should we file a 1041? Based on my limited understanding of the tax code, because the money placed within the trust grossed under $600, we should not need to.

2

In theory, the trust admin (the trustee/custodian) should have filed the 1041 each year. The trust should have either (a) paid tax on any gains or (b) distributed the gains to her along with a nice Schedule K-1, showing that she had income from the trust and was responsible for the tax on that income. In effect, the trust took that distribution to her as a deduction against its own income, thus negating the need to pay tax at the trust rate. Yes, if under $600, it could retain the income and still pay no tax.

Now, when she gets this money, and it seems it's all being distributed by your choice of "the money" not "some money", it's not taxable, or at least shouldn't be. The corpus of a trust is already post tax money (unless of course, it's somehow pretax IRA or 401(k) money), which is not so common.

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .