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Salinas California Form 1041: What You Should Know

Estates and Trusts — The most important thing to be aware of is that a trust cannot be used without the approval of the beneficiaries. A trust will not be Estates and Trusts. A trust has a Beneficiaries of a trust. Computation — Trust Income. Trust income is equal to the total income of the trust. Trust income includes, but not limited to, interest income, dividends, interest on money-market mutual fund and the interest paid on other financial investments. Trust income does not include the sale of trust property. Trust income is taxable as income of the trust. Distributions from a trust are taxable as ordinary income. The taxable amount is reduced by allowable tax deductions. Note, however, that if an investment income such as investment dividends would be deductible, any actual distributions from the trust do not result in additional income taxable to the trust, but the trust income would be taxed as ordinary income. Trusts Not Yet Assumed by Your Estate. Any trust owned by a person who is not yet dead is treated as an estate. An inheritance is taxable as if given by the person who is actually the decedent. Trusts Assumed by Your Estate. Tax benefits for estates assumed by the deceased are determined using the rules in IRC 6673(d)(3). Therefore, it may be advantageous to set up an estate planning committee that can assist in determining the most appropriate distribution arrangement for a trust to maximize tax benefits. In most cases, it is best to assume that the trust will be assumed in the event of death by one or both your descendants, the beneficiary. This eliminates the need to file a form 1041-T with an estate planning committee or to rely on the executor or administrator to make such decisions. A trust can be assumed by the surviving spouse as long as he or she is entitled to share in any income. For example, a 1,000,000 inheritance made on the death of a married couple would be assumed by the surviving spouse. Note, however, that the income allocated to one spouse through any share taken by the surviving spouse would not be counted toward the gross income of the estate. Trusts Assumed by Each Partner.

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