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Fees and income after a Crummy Trust payout

I am beneficiary of half of a Crummy Trust. The trustee told me I could either sell the securities or take them, but either way I was responsible for the capital gains that resulted, sooner or later. Most of the securities were proprietary and no broker would take them, so I sold them.

a) They were sold last year, but I will be paid this year. Which year do the capital gains go in. b) Will the trustee provide me with 1099s (or whatever the documents would be called) or do I have to figure it out?

The trustee is taking a 1% fee for the final accounting, and a lawyer is taking 1% for the paperwork. Seems excessive to me, but my lawyer says it is normal. Do I get to deduct my half of the expenses as legal and/or investment expenses?

Thanks much.

Reply to
Troubled
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A Crummey trust is set up in such a way that it is, by definition, a grantor trust, and you are treated as the owner. Potentially all income should have been reported on your own return, and the trust should not likely have filed a return. So a distribution of stock to you should not result in any taxable income.

If the income was paid last year, it goes on your return for last year.

I've seen fees of about 1% for managing a trust for a year. Taking that fee for a final accounting and surrounding paperwork seems excessive to me, too, though it really depends on how much money is in the trust.

Reply to
Stuart A. Bronstein

Years ago I got letters from the Trustee when funds were put into the trust, but I haven't had any communication from them in 10 years until last year telling me it was being paid out. I never put anything on my tax returns, nor was I ever told I was supposed to. I assumed the trust filed a tax return.

The trustee told me I was responsible for income after my Mother's death; implying that I wasn't before. That is all I know.

Reply to
Troubled

Normally a Crummey trust holds a life insurance policy, and there is no tax on the receipt of the death benefit. So if there was insurance on your mother's life, that makes sense.

But without knowing a whole lot more facts, it's impossible to give you any meaningful information.

Reply to
Stuart A. Bronstein

The insurance policies were on my Father, who died 12 years ago. Since then they were in mutual funds. My sister and I were beneficiaries on my Mother's death.

I contacted the Trustee. She said that prior to my mother's death the trust handled the income tax, but now it is my responsibility. They will issue a K1 for tax purposes.

Thinking back to a K1 I had on a NG ETF, it should contain the various expenses as well shouldn't it? I will probably have another question when I get it.

Reply to
Troubled

Taxation of trust income really depends on just who was a beneficiary of your father's trust, and exactly how the premium payments were structured. It's possible that your mother was considered the owner of the trust (not likely because it doesn't make a lot of sense in most circumstances), but without seeing all the information it's impossible to know for certain.

The K-1 might just show your net income/loss.

Reply to
Stuart A. Bronstein

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