Did you know that you need to pay taxes on income from your trust? Have you? When dealing with a trust, a whole new set of taxation issues come into play and you may need help navigating the new tax issues you’re faced with. Income from your trust is always paid either to the beneficiary or accumulated within the trust itself. The grantor is the person who puts assets into the trust. The grantor and beneficiary can also be the same person.
The most common type of trust formed to avoid probate are revocable living trusts. These types of trusts are always grantor trusts. The tax identification number of that type of a grantor trust is usually the grantor’s own social security number. If that’s the case, all income is reported on the grantor’s Form 1040. There are also various types of grantor trusts that use a different tax identification number from the grantor’s social security number. Regardless of its type, if income is retained in the trust or otherwise not reported on the grantor/beneficiary’s Form 1040, then the trust must file a Form 1041, possibly paying a higher tax rate on the income than would be assessed upon the individual’s Form 1040 return.
If the grantor is not the beneficiary, then the trust may be simple or complex. A simple trust mandates payment of all income earned by the trust, at least yearly, to defined beneficiaries. A complex trust does not mandate payment of income and may allow for payments to non-beneficiaries, such as charities. A trust’s status as simple or complex can change yearly, depending on the actual facts, such as whether the trust generated any earnings.
Whether simple or complex, the income paid to a beneficiary is taxed to such beneficiary at his/her tax bracket. Taxes related to income retained by a complex trust is paid by the trust. When a trust retains income, it pays taxes at a steeper bracket than individuals. That federal bracket is 39.6% once $7,500 is retained by the trust entity. Complex trusts, whether the trust income is entirely paid to the beneficiary or not, must file a Form 1041 for any year where income exceeds $600.
We can help you make sure you’re filing all of the correct IRS forms for any type of trust. Contact Matlin Law Group today to speak with a knowledgeable trust taxation attorney.
What Our Chicago Clients Are Saying About Us
Dear Eric, I just want you to know how much I appreciate everything you've done for me and the thoroughness with which you did it. You are indeed a most impressive will-maker, including the the serendipitous coverage your "compulsivity" supplies. You truly lift the experience from the quotidian to an art-form. In addition, you are a real mensch, in its best sense: open, warm, caring, understanding and honest. Again, my thanks to you and your staff for your help. With best wishes, S.B
Eric and Julie: On behalf of the Edgebrook Women's Club would like to thank you and express our gratitude for your wonderfully informative presentation to our group. As was evident from the many questions your information was needed, very well received and your situational examples registered with many in the audience. Thank you again for providing a much needed and informative presentation.
"Eric, Thanks again for helping me get this signed and completed. It's a big comfort knowing that my will and estate is in order. Thank you again for your generosity and friendship. I really appreciate being able to get this taken care of and with a certain level of confidence. I trust you and feel really comfortable with your advice. I've already referred some friends to you. I will continue to be your advocate and biggest fan!"
"We felt very comfortable with both attorneys. We would feel comfortable if we had to call to have questions answered. The atmosphere with Mr. Matlin was great, and we left the office feeling positive about something that is so important to us."
"I believe Eric did an excellent job communicating the related issues, options and was very helpful in assisting in making final decisions. The process was very helpful and resulted in us making the right decisions for ourselves. It was very easy and educational to work with Eric Matlin and his team."
Being a trustee or executor is stressful. Become de-stressed.
You have been chosen by a family member or friend to act for them or on behalf of their family in times of
Do you need a health care power of attorney? The answer might surprise you.
Let’s back up a little bit and talk first about what a health care power of attorney is. A health care power of
Should I agree to serve as executor?
Have you been appointed as the executor of an estate? Carrying out your duties can feel overwhelming and sometimes like a second job.
How to Contest a Will in Illinois
When a person passes away with a will, that will is submitted to probate. Probate is the process by which the directives in
DO “DINKS” NEED ESTATE PLANNING?
We often hear the from our married clients who have double income and no kids: "We do not have any kids so we only
DO YOU KNOW WHO YOUR HEALTHCARE AGENT SHOULD BE? TAKE THIS QUIZ TO FIND OUT.
QUIZ for HOW TO PICK A HEALTH CARE AGENT OR PROXY Sophie was laying in her bed feeling feverish and a little bit lost.
Should You Use A “Do-It-Yourself” Estate Planning Service?
QUESTION: Should You Use A “Do-It-Yourself” Estate Planning Service? Many people ask whether it is a good idea to use a DIY estate planning service to
Living Without a Will
A recent Gallup Poll has indicated that at least 56% of U.S. citizens do not have a will in place. Taking a closer
In re Estate of Marion Young Tait 2017 IL App (3d) 150834
In the recently decided appellate case, In re Estate of Marion Young Tait, the third district of the Appellate Court of Illinois was faced with
Electronic Records and end-of-life plans
Planning for the future of your health care doesn’t stop when you ink your name at the bottom of a Power of Attorney,
Spring Cleaning – Getting Your Documents Organized for Your Estate plan
It is officially spring! When many of us awaken from our long winter hibernation just in time for annual spring cleaning, the perfect
Are You Covering Your Children’s Health Insurance Costs Without Any Access to Their Medical Information?
The Affordable Care Act requires plans that offer dependent coverage to make the dependent coverage available until the adult child reaches the age
WHAT IS CAPACITY, AND WHY DOES IT MATTER?
Mom is 78 years old, living alone after the death of Dad. She was recently diagnosed with the early stages of Alzheimer’s. Mom
October is Breast Cancer Awareness Month
October is Breast Cancer Awareness month. All of us probably know somebody who has been affected by breast cancer. According to Cancer.org, breast
Local author pens estate planning book
Alan P. Henry, Freelance Reporter 12:59 am CDT March 28, 2018 The challenge, as Eric Matlin saw it, was to write a
Should Your Executor Be Your Eldest Child?
When we meet with our estate planning clients to talk about who might act for them in the event of disability or death,
Barbara Bush’s Comfort Care Decision at End of Life – Rest in Peace
At the end of life, families are often faced with decisions about whether to continue to treat health conditions facing a loved one
Estate planning attorney Eric Matlin pleads guilty to entertaining readers
Attorney Eric G. Matlin was recently featured in a weekly Sunday Breakfast article in the North Shore Weekend by JWC Media, written by
"Be Kind; Everyone You Meet is Fighting a Hard Battle"
“Everyone you meet is fighting a battle you know nothing about. Be kind. Always.” Each year, nearly 45,000 Americans commit suicide, and that’s
Non-traditional relationships also need estate planning.
If you have an important non-traditional relationship other than marriage, it is especially imperative that your legal affairs are in order. Sometimes the
When Do You Need Estate Planning? How to Start at Any Age
When do you need estate planning? At every stage of adult life! Estate planning isn’t just something older people with great wealth do.
Will Planning Guide: How to Make a Legal Will in Illinois
Making a Will can be a daunting task. You know it’s important to plan for what will happen to your property, dependents and