Refusing the income from a trust fund.

I know one can refuse an inheritance, but can one refuse income from a trust fund without gift tax consequences?
For 28 years, I have been receiving quarterly checks from a trust fund set up by my grandfather. I will never receive any corpus of the trust. I'm 72 years old with no debts. With my Social Security, pension, and IRA, I have enough money to live for the rest of my life.
Realizing that this is not reversible under any circumstances, can I write a letter to the trustee(s) asking them to treat the trust fund as if I were dead? As the income stream has value, would this be considered a gift for gift-tax purposes?
I live in Massachusetts, if that matters, but I'm primarily interest in U.S. code.
Reply to
NadCixelsyd
I don't know the answer, but would what you suggest result in greater overall income taxes? If you are in a low or zero bracket, and the amount you are receiving not large, you pay little or no income tax. The new recipient may be in a higher tax bracket. If so, why don't you continue to receive the income and make a gift to the new recipient? Again, the actual numbers matter in this analysis.
Reply to
Pico Rico
The general rule is that you are not allowed to assign income.
How nice for you.
Actually it may be possible for you and the residiary beneficiaries to agree to partition the trust. In that way you would receive the actuarialy value of your portion now all in cash, and they would likewise receive theirs now, too. This is not available in all cases in all states, but if it seems interesting to you, you should look into it. Receiving part of the corpus of the trust should not be subject to income tax.
Yes, you can do that. But it would have been better for you to have done that 28 years ago.
The law allows what is known as a qualified disclaimer. If you in essence refuse the gift in writing within nine months of receiving it, you can have it treated as if you had died before the person who gave it to you.
If you want to do a disclaimer after nine months, it will likely be subject to gift tax.
On the other hand with the current $5 million lifetime exemption, is that really an issue for you?
Reply to
Stuart Bronstein
There is a time limit on disclaiming an inheritance from a trust. Last time I looked, it was 9 months from the date of death. It appears your only option is to just gift it away if you don't want it. Effectively, this means that you would have to declare the income that is reflected on the K-1 that you receive. If you gift the money to a recognized charitable organization and you itemize your deductions you can deduct the charitable gift.
Reply to
Alan
trust fund without gift tax consequences?
set up by my grandfather.
What are you trying to accomplish?
Why not just stop cashing the checks, and let the trust accumulate the income and pay the tax (at trust tax rates)?
Reply to
Mark Bole
why would you want to create such grief for the trust? Not cashing the checks doesn't mean the trust is entitled to the money.
Reply to
Pico Rico
That's my question -- why change anything?
I had one trust client a number of years ago where one of the income beneficiaries could not be contacted (and apparently did not want to be), no tax ID, etc. There is a way to report this that I researched at the time, I recall that essentially the trust tax return is partitioned, for example X percent as a complex trust (for the recalcitrant beneficiary), and 1-X percent as a simple trust for the remaining beneficiary(s). I forget the exact term for this.
Reply to
Mark Bole
If someone refuses to accept a payment, technically that money should be send to the state to be held for that person or his heirs. In California the state holds "lost" or unclaimed funds for five years. If the person entitled to it doesn't claim it within that time, the state gets to keep it.
Reply to
Stuart Bronstein
And as I understand it, it is next to impossible to get the state to give you the money once they have it. It seems no proof is good enough for them. Maybe this situation has improved.
Reply to
Pico Rico
If you are talking about California (the only state I've had experience with) what you understand is wrong. While the state wants definite proof and documentation to show entitlement to lost property, once that is produced they have normally been very cooperative in the cases I've dealt with. My experience with this stretches back about 20 years.
Reply to
Stuart Bronstein
a few years ago they were so screwed up that they were compelled by the legislature to stop taking in more funds until they got their act together. Perhaps that has happened.
Reply to
Pico Rico
| | And as I understand it, it is next to impossible to get the | | state to give you the money once they have it. It seems no | | proof is good enough for them. Maybe this situation has | | improved. | | If you are talking about California (the only state I've had | experience with) what you understand is wrong. While the state wants | definite proof and documentation to show entitlement to lost | property, once that is produced they have normally been very | cooperative in the cases I've dealt with. My experience with this | stretches back about 20 years.
Well, this did get me to take a look. Apparently there was about $30 under may name on the California list. What is a bit daunting, however, is the extensive documentation that you need to send in to make a claim:
formatting link
Oddly enough, they have my address, where I have lived continuously for the last 20+ years.
I guess to put this remotely on-topic, the funds apparently are from H & R Block Tax Services listed as "Misc Outstanding Checks", but I have no idea what the origin of that is from. Unless it is some sort of tax software rebate.
Reply to
taruss
I humbly request (or dare you) to fill out the paperwork and report your progress. There is also a link to click on to claim your money, but since I am not on the list I don't know what happens after you enter the first bit of information and click "continue".
I happen to know several people on the list, and the address shown is where they have lived for decades, and continue to live.
Reply to
Pico Rico
A few years ago I got half of a $1200 auto insurance payment that the state held for a client of mine. The reason she got only half was that the original check had been made out to my client AND an auto repair shop, but the repair was never done. The shop was quite unresponsive when I tried to explain that this woman was entitled to the money. The state, in Solomon-like fashion, said she was entitled to half, and she got it.
The paperwork wasn't all that daunting, but I'd never do it for $30.
Jay Wiedwald
Reply to
jay_wiedwald
| Tom Russ wrote in message | || [Lots of paper work for $30.] | | I humbly request (or dare you) to fill out the paperwork and report your | progress.
In the interests of science, I will.
| There is also a link to click on to claim your money, but since I | am not on the list I don't know what happens after you enter the first bit | of information and click "continue".
The link takes you to an interactive page that generates a form that you have to print out. Intriguingly, the input form *-encodes your SSN and the displayed version of the form also has them *-ed out, but the number is visible on the form. (It would be pointless otherwise).
Reply to
taruss
What information is required for this form? You print it out and mail it in? Do you need to supply additional documentation?
Reply to
Pico Rico
| | | The link [to the claim form] takes you to an interactive page that generates | | a form that you have to print out. | | What information is required for this form?
Basic identifying information: name, address, phone, Email, SSN, DOB, Drivers license number, claim number.
It also requires a signature, which must be notarized for amounts of $1000 or more.
| You print it out and mail it in?
Yes, after signing it.
| Do you need to supply additional documentation?
Yes. Here is a list:
formatting link
Also includes a catch-all notice that they will contact you if more information is needed.
Reply to
taruss

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