Trust fund taxes are taxes that are paid by a trust when it earns income or when it distributes that income to its beneficiaries. These taxes can be paid by the trust or by the beneficiaries, depending on the type of trust and the characteristics of the trust’s income. By understanding the different types of trust fund taxes and when they are due, a business professional can ensure they comply with the law when dealing with trusts.
Trust Fund Income Taxes
Trust fund income taxes are charged when a trust generates income from investments, such as bonds or stocks. These taxes may be imposed on either the trust itself, if it is set up as a taxable entity, or on the beneficiaries, if the trust’s income is considered to be taxable as “unearned” income. Trust income taxes must be filed separately from personal income taxes.
Trust Fund Estate Taxes
Trust fund estate taxes are payable when the trust distributes its assets to beneficiaries or on the death of a beneficiary. These estate taxes are due to the government and must be paid within nine months of the distribution or death of the beneficiary, and must also be paid separately from any personal income taxes.
Practical Advice
It is important for any business professional dealing with trusts to be aware of the trust fund taxes that are due and to have a good understanding of the different types of taxes that can be imposed. Understanding trust fund taxes can help ensure that the trust is in compliance and can save money in the long term.