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Distribution fro Dynasty Trust

  • 1.  Distribution fro Dynasty Trust

    Bronze Most Valuable Member
    Posted 08-02-2019 12:41
    Hi:

    Dynasty Trust
    Grantor = Sue's mother
    Beneficiaries = Sue and her 3 children
    Initial trustee = Sue's husband Tom
    Next trustees if Toms ceases to act = Sue's 3 children together by majority vote

    Sue can request funds at any time for herself or any of the kids to be distributed for maintenance, support, health or education. Tom can distribute any or all of the assets to Sue for any purpose whatsoever.

    so – the question is – if, at Sue's request, $500k is distributed to one of the kids what happens? is a K-1 issued to the kid, generating taxable income? Presumably in the absence of any distributions, the trust pays the taxes, right?

    I'm think it sounds like a distribution of principal and no K-1 would be generated. am I right?

    thanks all!

    Kate

    ------------------------------
    Katharine G. Herman, CPA
    33 Crescent St
    Groton Long Point, CT 06340
    and
    722 Commerce St
    Thornwood, NY 10594
    (t) (914) 693-6058
    (f1) (866) 462-7545
    (skype) kate.herman
    (w) www.kghermancpa.com
    (e) kate@kghermancpa.com
    ------------------------------


  • 2.  RE: Distribution fro Dynasty Trust

    Silver Most Valuable Member
    Posted 08-05-2019 17:46

    You need to carefully review the trust.  If the discretionary distributions can only be made from Tom to his wife then isn't she making a gift to her child?  If it is determined it is a distribution to her then she receives the k-1 accordingly.

     

    Very truly yours,

     

    ROBERT S. BARNETT

     

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  • 3.  RE: Distribution fro Dynasty Trust

    Bronze Most Valuable Member
    Posted 08-06-2019 09:14
    right.  thanks so much - good point.  i'm pretty sure distributions can also be made to kids, but will re-read!

    ------------------------------
    Katharine G. Herman, CPA
    33 Crescent St
    Groton Long Point, CT 06340
    and
    722 Commerce St
    Thornwood, NY 10594
    (t) (914) 693-6058
    (f1) (866) 462-7545
    (skype) kate.herman
    (w) www.kghermancpa.com
    (e) kate@kghermancpa.com
    ------------------------------