Introduction to Income Tax of Trusts & Estates

[@The_Renaissance_Dan]

Super helpful overview as I'm trying to work my way through a trust & estate tax class! It maybe would have been helpful if you inserted occasional reminders of the grand scheme of things. Specifically, when you started talking about the 2 tiers of distributions in a complex trust, I think it would've been helpful to remember that we are deciding how to distributing the trust's "income" for tax purposes, and all 2nd tier distributions that exceed DNI are officially coming from the corpus and are therefore NOT taxed as "income" to the beneficiary (and are not included in the trust's distribution deduction.)

[@ExploretheCode]

Thanks, Daniel. Next Trust & Estate video I do, I'll definitely make sure to stress that. You are 100% absolutely correct, and it's definitely something I need to stress on that topic. I appreciate your feedback!

[@MrDimond100]

I also think this is an 'awesome' summary of trusts/estates that highlights key concepts for someone who is taking the IRS Enrolled Agent Part 2 Exam.

[@ExploretheCode]

Thank you!

[@markruffles4663]

@@ExploretheCode Can you please do a video about targeted allocations, the treatment of preferred return where there is no corresponding income item to allocate, NR deductions issues with targeted allocations, or fractions rule issues with targeted allocations?

[@ExploretheCode]

@@markruffles4663 I'll add it to the list. Thanks!!

[@markruffles4663]

@@ExploretheCode Thanks! I just got my tax LLM. I took every partnership class available in both my JD and LLM and I swear they barely mentioned targeted allocations, despite seeing them everywhere in practice.

[@ExploretheCode]

@@markruffles4663 Yes, you are right. I would say in practice the 704 allocation issues are filled mostly with targeted allocation related topics and drafting in the partnership agreement.

[@jcman240]

Doing my grandmothers taxes here. My grandfather (deceased 2014) has a simple trust that she is the trustee and benificary for. Her taxes from last year have roughly 50% of trust DNI on sch K-1 for her personal taxes but the brokerage statement shows no distributions were made, but it does show dividends and LT capital gains were made for the year. Does she have to calculate her share of DNI (based on beneficary % or something else)and report that on her personal taxes despite no actual disbursement being made from the trust? Also, last years return shows about 50% ordinary dividends allocated to beneficiary (her) and the other 50% to the trust. Is she 50% beneficary? How come I'm not seeing K1 for total ? If her children hold the other 50% would they have to report share of DNI? I'm confused, any help is appreciated.

[@ExploretheCode]

Thanks for the post! These are great questions. I strongly recommend reaching out to a local EA, CPA, or attorney that can help with these specific issues as these are difficult and very specific. This specific video is meant to be a basic level overview of income tax of trusts and estates.

[@daloc8615]

On the initial return on a trust, is all thats claimed is the estimated tax payment? Or is this when one claims future interests via the trust corpus?

[@thrillbilly41]

Intestate estate My dad passed August 2021. I didn't get an EIN and account until March 2022. Whatever the attorney did, it made filing for 1041 deadline as April of 2023 now? Nothing was sold from the estate in 2021 and nothing distributed. So did I need to (or should I still ) file an initial 1041 for 2021 for zero dollars? And then do I need to file another final 1041 for the this tax year to show dad's house selling while in probate to pay the debts?

[@12012channel]

When someone dies is it possible to have neither an estate or trust?What happens if you don't file a tax return for a deceased person if you are not part of a trust or estate? Also,The tax return asked for a 1095A and I have no idea if that applied to her. My sister said not to do the tax return because if they look it up all the money will go to her husband because they never officially divorced. Is this right? Will we get into trouble for not doing it if we are not in the trust or estate but are blood relatives?

[@ExploretheCode]

Yes, it's possible not to need to file an estate or gift tax return. As mentioned if below a certain amount no return is required.

[@12012channel]

@@ExploretheCode If income is over $3000 it would need to be filed,correct? Would the estate be us the children or her husband.They did not live together for close to 20 years but never officially divorced or separated. How do we know who the estate or executor is? Also, we have no idea where the husband is. It is possible that he is in a different country.We do not believe he knows about the death. Would the IRS notify him and give him the refund.Also what about the 1095A if we don't know. At the time of death she was 69,if that helps. Also, just for clarification, an estate is automatically made? I thought we had have to go to court in order to become the estate if no trust has been arranged?We are also in California,if that helps.

[@chuckhf420]

Awesome thank you

[@luckylunaloops]

Would there ever be a scenario where a trustee issued a K1 to a beneficiary with a distribution amount of, for example, 40k, but the actual amount receieved by the beneficiary was only 15k? If so, what happened with the other 25k?

[@luckylunaloops]

*received*

[@ExploretheCode]

Thanks for the question, Xristobel. That is an excellent one! I would say it is possible, but not likely. I have seen some weird things on 1041 K-1s before, including distribution issues. I will tell you that I am not an expert in the Trusts and Estates area, and it is an area that I plan to learn more and create more videos in the future. I do know that simple trusts are extremely straightforward so I would believe that there should be a match there in terms of your question. However, complex trusts can get extremely messy, and I wouldn't be surprised if this scenario is possible. I'm sorry that I am not able to help you the level I would like. I recommended looking online and trying to search "distribution differences for tax purposes in complex trusts." There are many accounting and law firms that publish in this area that provide some great help!

[@luckylunaloops]

@@ExploretheCode Thank you. I think it's an irrevocable, non grantor pass through trust. Just curious as to how this could happen to a beneficiary year after year after year.

[@mecbalde888]

Can you please do more videos about trust and estate taxation, sample problem computations and form 1041 please. FAI, TTI, and DNI computations. Thank you!

[@ExploretheCode]

Thank you! I will put them on the list of future videos to add!!

[@mecbalde888]

@@ExploretheCode thank you so much! I am currently studying it and I am totally lost😰

[@ExploretheCode]

@@mecbalde888 Glad to help in any way!!

[@quarantinekitchen6909]

Your so smart

[@quarantinekitchen6909]

Help, been in accounting public firm 5 years still feel like I know nothing 😩 and my little self has been passed over promotion by people with no cpa 👩‍💼 :( #SadBlackWoman

[@ExploretheCode]

Thank you for your comment. Fear not! I have lots of videos to help you. Please feel free to search my KZbin page for videos on topic that will help you!

[@kaylamobley3703]

This is good information, just need to slow down a bit. You're talking fast.

[@ExploretheCode]

If it helps you can slow down the speed of the video when playing.