Trust

[peggysioux]

Irrevocable trust with two beneficiaries has capital gain due to sale of asset in 2022. Trust attorney is advising one of the beneficiaries who is the trustee to have trust pay capital gains on his portion of gain prior to disbursement. Once taxes are calculated and paid on the capital gains for trust, the second beneficiary would receive 50% of remaining funds and would pay capital gain on his distribution. Can a trust choose to pay the capital gains on only a portion of the assets? Trust document does not provide answer. Trust was originally a revocable trust that became irrevocable at death of trustor. The beneficiaries did not do anything with trust or assets until many years later. Originally, asset was to be split between two beneficiaries.

Peggy Sioux

[Rapid Robert]

"Trust attorney is advising one of the beneficiaries who is the trustee to have trust pay capital gains on his portion of gain prior to disbursement"

Why? I am not a trust expert but none of this plan (having the trust pay some but not all cap gains tax, to the benefit of only one beneficiary) sounds right to me.

[Lion]

Read the trust document. Maybe capital gains stay in the trust while interest/dividend income might get distributed. But the trust document should tell you and the trustee what he can and cannot do, how various types of income are treated/retained/distributed, and what entity pays income tax. Going to be a bookkeeping nightmare if distributions are not equal, so charge accordingly!!!