If you have assets that are held in a trust, you may have wondered whether or not you’ll have to pay taxes on them. In most cases, this depends upon the type of trust you have, and whether or not the grantor of the trust is still alive. A trust is a legal agreement that the participants set up in order to give control of assets to someone. For example, a married couple may set up a trust with their children as the beneficiaries. This means that if one of the couples should die, the other can control the assets, and when they’re both gone, the children will inherit them. A trust tax return is filed separately from a personal income tax return, on IRS Form 1041.
Types of Trusts
One of the most common types of trusts is the revocable trust. A grantor initiates this trust when he/she is still alive and, if the assets in the trust grow, they are reported on the grantor’s personal income tax return. This type of trust can be changed or revoked at any time by the grantor. However, the trust itself is not taxable while the grantors are still living. After they die, however, the beneficiaries may be taxed on the assets in the trust.
An irrevocable trust is what a revocable trust becomes after the grantor of the trust dies. It is then taxable, and the trustee must file a separate tax return for the trust. The beneficiaries of a revocable trust don’t have to pay taxes on the trust’s distributions, but they do have to pay taxes on distributions from an irrevocable trust. This is also filed by the beneficiary or trustee on a Form 1041.
Call to Schedule a Free Consultation With an Indiana Trust Tax Accountant Today
If you are a participant in a trust fund that has income or are the beneficiary of assets that are held within some type of trust, you may have questions about taxes. To get those questions answered, call to schedule a free consultation with an Indiana trust tax accountant today. The expert professionals at the OnTarget CPA certified public accounting firm understand the tax issues relevant to trusts and can help ensure that you meet all the requirements of the IRS. We serve the cities of Indianapolis, Carmel, Fishers, Zionsville, Avon and surrounding communities. Check out our website at ontargetcpa.com or give us a call at 317-820-2000 and let us give you useful legal tax guidance that takes you in the right direction.
