When taxpayer passes away that had a revocable living trust, would the trust still be considered a grantor trust but now a irrevocable grantor trust? Situation is this: Taxpayer passed away in 2009 and living trust stated that $35,000 was to be distributed to family members with the remaining assets in trust to be split between two minors and two trusts were to be set up for those minors. However, new trusts for minors were not set up until 2011 and in 2010, trustee took money from IRA that was in trust to disburse the $35,000 to family members. So trust return needs to be filed for 2010 but unsure if it is still considered a grantor trust, complex trust or simple trust. No where in trust does it state complex or simple trust.
-
-
Trust
It's not a grantor trust after the death of the grantor.
A grantor trust, by definition, is one in which the grantor retains a certain degree of control and/or beneficial interest in the assets and income of the trust. But a dead grantor has no control, and no beneficial interest. It ceases to be a grantor trust upon the death of the grantor.
In most cases, and yours is probably not an exception, a revocable trust becomes irrevocable upon the death of the grantor. The only exception that comes to mind would be a trust in which the husband and wife were grantors, one dies, and the surviving spouse still has the power to revoke the trust.
A simple trust is a trust that (1) is required to distribute all current income to the beneficiaries in the year during which the income was earned and (2) actually does so.
A complex trust is...
any trust that is not a simple trust.
Like my uncle once taught me, everything in the world is either elephant or non-elephant.
A trust may be a complex trust in one year and a simple trust in a different year.
The threshold question is whether the terms of the trust, for the year in question, required the trustee to distribute all current income to the beneficiaries during that year. If the language of the trust does not require this, then it's not a simple trust. If the language of the trust does require this, then you have to ask whether the trustee actually did what the language requires...
Hope this helps.
It is possible for a tax professional to encounter a simple trust that turns out be pretty f**king complex.
BMKBurton M. Koss
koss@usakoss.net
____________________________________
The map is not the territory...
and the instruction book is not the process. -
Trust
Thank you Koss for the info - this is my first trust return and appreciate any knowledge you can pass on. The other question I have is regarding the taxation of the 1099-R income. Would it be taxable to trust or to the beneficiaries? The funds did pass to the beneficiaries but the will did not state that funds had to come from the IRA, but that is where the trustee decided to obtain the funds to handle directive of will. Beneficiaries will not be happy when they receive a K-1 and realize they will be taxed on their inheritance. Can you also recommend a good study guide or class for trusts?
Much appreciated!!!
PeggySiouxComment
Comment