BENEFICIARY TRUST SAN DIEGO
The Beneficiary Trust is created upon death. A trust is a separate legal entity for federal income tax purposes and the person with fiduciary duty must file the fiduciary tax return Form 1041 to report income, deductions, gains and losses for beneficiary trust.
When to file beneficiary trust tax return?
A trust income tax return must be filed if the trust has any taxable income for the year or gross income of $600 or more. If one or more of the beneficiaries of a domestic trust or estate is a nonresident alien individual, the fiduciary must file even if income is less than $600.
Basic Concept of Fiduciary Taxation:
The taxable income of a trust or estate is determined in the same manner as an individual with some modifications;
* The trust or estate gets a deduction for taxable income distributed to beneficiaries;
* What is left represents taxable income retained by the trust or estate;
* The trust or estate pays a tax on such accumulated taxable income;
* The beneficiary or beneficiaries report and pay tax on the distributions of taxable income; and,
* All taxable income will be taxed at its final situs.
A fiduciary duty exists to "Get the Money Right" therefore, accountings are required as often as stated by the trust document, which also governs the income distribution to beneficiaries. It is essential to the effectiveness of the decedents wishes that the scope of fiduciary duty be understood as it pertains to the professionals and beneficiaries involved. Finding the right fiduciary relationships is pertinent to maintain the trust with the family and accuracy of reporting and tax return preparation.
Four Fundamental Obligations constitute Fiduciary Duty
1. Duty of Management
2. Duty of Preference or Loyalty
3. Duty to Account
4. Duty to Disclose
Trust Administration of Beneficiary Trust
Trust Administration begins with education the settlor and the settlor's family that the creation and funding of the living trust does not conclude the estate planning process. On the death of the first spouse or on the death of the single grantor, an entire new segment of the estate planning process begins. Subtrusts must be funded, the estate tax return must be prepared and filed, and the ongoing trusts must be monitored and maintained. This requires the expertise of the estate planning team and involves additional expense to the client. Good estate planning considers trust administration long before anyone dies.
A remainder beneficiary is a person who inherits or is entitled to inherit property upon the termination of the estate of the former owner. Usually this occurs due to death of the former owner's life estate, but this can also occur due to specific notation in a trust passing ownership from one person to another. The remainder beneficiary receives what is left after the primary beneficiary or income beneficiary is deceased.
Income Beneficiary is the person first in line to receive income and assets from the trust. This person usually has a life estate meaning they are entitled to benefit from the trust assets until his/her death.
Why Form a Beneficiary Trust?
Creating a Trust to Benefit your family and business, protecting your assets will help reduce taxes, preserving more of your estate for those you love and care for the most. You deserve to chose what happens to your money and failing to plan, is planning to fail. Let us help you succeed and get your estate planning completed now. Wills, Trusts and Powers of Attorney are the beginning of the process. The true benefit is the tax planning that will enable you to keep more money now and in the future. Contact us now 619-955-7422.