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    trustfundbaby's Avatar
    trustfundbaby Posts: 5, Reputation: 1
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    #1

    Aug 9, 2012, 03:39 PM
    Income Taxes on Trusts
    I am the beneficiary of a trust. I have been receiving a monthly payment (interest and dividends) for almost 15 years now, and I will inherit the entire amount next year. I live in California. What are the tax implications in this scenario?
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #2

    Aug 9, 2012, 03:43 PM
    That depends; how much is the trust?
    trustfundbaby's Avatar
    trustfundbaby Posts: 5, Reputation: 1
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    #3

    Aug 9, 2012, 03:58 PM
    It
    trustfundbaby's Avatar
    trustfundbaby Posts: 5, Reputation: 1
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    #4

    Aug 9, 2012, 04:00 PM
    Quote Originally Posted by trustfundbaby View Post
    It
    It's about $585,000
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    trustfundbaby Posts: 5, Reputation: 1
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    #5

    Aug 9, 2012, 04:15 PM
    The trust is about $585,000.00
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #6

    Aug 9, 2012, 04:16 PM
    Well, there will be NO estate taxes, as it is below the $5 Million minimum.

    As for whether there are income tax issues, I cannot say without reading the trust paperwork.

    STRONGLY recommend you find a local tax professional (enrolled agent would be best) to review that paperwork.
    trustfundbaby's Avatar
    trustfundbaby Posts: 5, Reputation: 1
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    #7

    Aug 9, 2012, 04:18 PM
    Thank you so much!
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
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    #8

    Aug 9, 2012, 04:19 PM
    Glad to help!
    chebowitz's Avatar
    chebowitz Posts: 9, Reputation: 1
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    #9

    Aug 10, 2012, 11:08 PM
    While I agree with AtlantaTaxExpert regarding seeking out a local tax professional, here some broad comments that may be of help. It sounds like the trust is irrevocable (and my comments assume this). If so, then estate taxes will not be an issue even if the property was valued in excess of the current $5.12mm exemption (due to expire at end of 2012 and revert back to $1mm). However, once you receive the trust assets, it will be part of your estate, s/t estate taxes (if you have a large enough estate, consider trust decanting strategies). Also, if the assets are the same as when the trust was first funded, then the cost basis will not be stepped-up to current market value when it transfers to you . So any unearned appreciation will be s/t capital gains taxes in the event they're sold, but not until then.
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