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Financial Planning / Tax Strategies


Subject:  Re: Taxes for Family Trust Date:  5/12/2017  12:27 PM
Author:  ptheland Number:  125901 of 132868

Who pays the taxes on the trust income is something that might be addressed in the trust document. Its possible for the trust to say that the trust will pay the taxes. That's often not a good idea, though, because the trust gets into higher tax brackets much faster than an individual will. The trust cannot force a beneficiary to pay the tax without actually giving the income to the beneficiary.

If the trust is silent on taxes, generally the beneficiaries pay the tax to the extent they receive any funds from the trust. This is accomplished through a special deduction for trusts called the income distribution deduction. If a trust distributes income to a beneficiary, the beneficiary pays the tax, not the trust.

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