I live in California and receive quarterly interest payments from a family trust and receive a K-1 at the end of the year because of those payments (interest that the trust generates). When there is a final distribution of the principle trust assets will there be tax consequences if this amount falls below the estate tax threshold? So I shouldn't receive a K-1 for the entire distribution, only for my share of the income generated during that tax year, am I correct?

The K-1 may show the whole distribution without any estate or Income TX being due.

You nerd to

You need to discuss this face-to-face sith a local tax pro (CPA or Enrolled Agent) to get advice based.on your ENTIRE financial situatiln.