Some people set up a trust fund for medical expenses. So you and your spouse established the trust for your spouse’s medical bill and you are a trustee of the trust. How did you set it up?/ did you set it up as revocable or irrevocable trust?? If it is arranged during the lifetime of the person who sets up the account, it is called a living trust Since this trust is revocable, it means that you can change it any time or upon any circumstances..
As said previously, you will not need to file IRS Form 1041 for your revocable living trust as long as you are alive and well and serving as the sole Trustee or as a Co-Trustee of the trust.As you use your SSN# for the trust, all interest, dividends and other income earned by the assets held in your trust will be reported to the IRS under your very own SSn# Therefore, all income earned by your revocable living trust will be reported on your very own IRS Form 1040, not on a separate Form 1041.
As a trustee - you are in charge for the trust and if the trust has any income - either distributed or not - your should file trust income tax return - form 1041 .
If the trust is irrevocable trust, then, As a trustee , you are in charge for the trust and if the trust has any income - either distributed or not - your should file trust income tax return form 1041and report distributed income to beneficiaries on sch K-1
The trust) must file Form 1041 aslongas it has Any taxable income for the tax year; Gross income of $600 or more (regardless of taxable income.
As long as trust's income is distributed - it is taxable on each beneficiary tax return and not taxable on the trust tax return. Medical expenses paid by the trust on behalf of beneficiary deemed distribution. You may report that information in the box 14 with the code H and may add a separate sheet with details.the income will be distributed from the trust within tax year - that income will be taxable for recipient ;the income will not be distributed from the trust within tax year - that income will be taxable for trust.
Usually individual tax rate is more beneficial, but that depend on other circumstances as well.After the trust is funded, the trustee role becomes critical;the trustee must have a good understanding about how eligibility works – and he or she must be willing to keep up with the law, including paying taxes, keeping records, investing trust property, and etc. |