The more complicated the estate, the more likely this is done with guidance from an attorney or CPA. Broadly, unless the trustee of a non-fixed trust has elected for it to be a family trust, a beneficiary of … A third party service provider can be a family member, a non-family member, or a professional services company. As directed by the trustor, upon a specified event, such as the death of the trustor or a beneficiary attaining a certain age, the trustee is responsible for the accounting and possible distribution of trust assets to beneficiaries. Trusts are subject to different taxation than ordinary investment accounts. Trusts are a type of device used to transfer property. This doesn’t influence our content. ), and the terms by which the estate is meant to be distributed. You see, the distribution of trust assets to beneficiaries happens when the Trustee, and if applicable, the Co-Trustee, meet all their fiduciary duty. Disclaimer: You should send an official written communication notifying beneficiaries that the event the trustor specified as triggering … An intentionally defective grantor trust (IDGT) is used to freeze certain assets of an individual for estate tax purposes, but not for income tax purposes. The minutes allow distributions to all the income categories. The K-1 indicates how much of the beneficiary's distribution is interest income versus principal and, thus, how much the beneficiary is required to claim as taxable income when filing taxes.. Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. If you are a beneficiary of a family Trust fund, then there are a myriad of topics to understand how trust fund distribution to beneficiaries occurs. Property left to each person often needs to be transferred into his or her name, and appropriate documentation of the transfer must be completed and filed. Trusts can also help to reduce estate and inheritance taxes as well as avoid probate, which is the legal court process of distributing assets upon the death of the owner. Trust beneficiaries must pay taxes on income and other distributions that they receive from the trust, but not on returned principal. If you’re a trust beneficiary there are different rules depending on the type of trust. We strive to help you make confident insurance and legal decisions. Trustees are responsible for managing assets involved with the estate of another individual according to a trust agreement. Jeffrey Johnson Once money is placed into the trust, the interest it accumulates is taxable as income, either to the beneficiary or the trust itself. A family trust is still one of the best ways to protect your assets, (especially the family home) or put aside funds for your family’s future. The trust must pay taxes on any interest income it holds and does not distribute past year-end. 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