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grantor trust death of a grantor how to report income

Level 1

I have a grantor trust. The grantor died at the end of 2019. There is a little dividend Income and a $10 capital gain. Does the trust report the income or is it distributed to the beneficiaries to report on their returns? if so how do I make that happen on the input forms

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2 Replies 2
Level 12

Ask the people who sold them the living trust.  While you are at it, ask why it's been more than a year and the assets haven't been distributed.  Isn't that what they said would happen with probate?

No, I am not tryiing to show condescension or contempt for you.  It's just a good example to point out to other clients who might be seeking a false sense of security from some document churned out by the word processor.  

The trust became irrevocable when the grantor died.  If an irrevocable trust has more than $100 income, it has to file a 1041.  If the income was distributed to the beneficiaries during the year, it passes through to them on a Schedule K-1.  

Were there other income-producing assets not in the trust?  What happened to them?  You may be able to combine the trust and estate assets into a single 1041, with a $600 exemption, but I always have to look that one up.  

Level 1

Thank you, That's the conclusion I have come to. Assets were transferred , but in the meantime there was income. I assume the beneficiaries need to pay taxes on that . So I will proceed accordingly.

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