Living Will tax or no In distribution of monitary assets from a living trust…

Living Will tax or no
In distribution of monitary assets from a living trust valued just under 300,000 are there any taxes to be paid by the heirs? Each heir will receive under 50,000.

2 thoughts on “Living Will tax or no In distribution of monitary assets from a living trust…

  1. Re: Living Trust – taxes?
    For federal and state estate taxes, probably not. Each person can leave up to $650,000 tax-free this year, and if no federal tax is owed, no state tax is owed either. This is called the “Unified Credit amount.”

    Some caveats:
    1) Make sure the unified credit, or a portion, wasn’t used during the person’s lifetime (gift of assets over $10,000)
    2) Make sure the $300,000 estate figure includes ALL assets, such as joint tenancy property, life insurance proceeds, retirement plan benefits, etc.
    3) The trust may still owe income tax before the money is distributed.

    The above caveats should be answered by the trustee–it’s his or her duty to pay taxes owed by the estate.

    Chris Johnson
    Christopher B. Johnson, Attorney at Law
    790 East Colorado Boulevard, Ninth Floor
    Pasadena, CA 91101

  2. Re: Living Will tax or no
    Leavign aside the issue of estate taxes, which was answered for you already, whether or not the beneficiaries will have income tax consequences is a bit more complicated. It is impossible to determine without reading the trust and knowing what was distributed.

    However, you should be aware that it is possible that the beneficiaries will be liable for income tax as a result of the trst termination. Because the trust is terminating, it is considered to be a “complex” trust (rather than a “simple” trust). Generally speaking, the beneficiary of a complex trust must include in income his or her proportionate share of any income of the trust that the trustee is required to distribute to him or her, regardless whether it is actually distributed, up to the beneficiary’s share of the trust’s “distributable net income”. There are many other little rules that make this area of tax law really complicated, so you will need to consult a good estate planning attorney or even a very good CPA with experience in this area.

    Leslie Beckhart
    Law Offices of Leslie Kent Beckhart
    1122 Armada Drive
    Pasadena, CA 91103

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