Trusts, just like individuals, must pay taxes under certain circumstances. For estates that incorporate the use of trusts, these taxes may be due during the estate implementation process in California. The rules, laws, and regulations surrounding taxes on trusts and estates are complex. Fortunately, an experienced Orange County trust lawyer can oversee the trust administration process in order to ensure that taxes are properly paid.
For many trusts, taxes become an issue following the death of the grantor. At this point during the trust administration process in California, it is often the successor trustee who is charged with the responsibility of determining the tax liability of the trust. Successor trustees may enlist the help of an experienced tax advisor and legal professional. The following are five helpful facts relating to trusts and taxes as you begin your role of successor trustee:
- A trust is a taxable entity.
- A California living trust may not have to obtain a tax ID number or pay taxes during the lifetime of the creator.
- The trustee is responsible for paying any taxes owed by the trust.
- A trust reports its income and tax owed on Form 1042.
- A trust reports income that is distributed to beneficiaries using Form K-1.
As successor trustee, it is helpful to understand how revocable living trusts work. Our guide, Understanding the Revocable Living Trust – In Language that Anyone Can Understand in 8 Minutes, provides additional information. To learn more, contact the experienced Orange County trust attorneys at the Law Office of James F. Roberts & Associates, APC. Call our office today at (714) 459-5481 for a consultation.