Most people think of being left with a trust fund as a beneficiary must be an awesome thing that sets you on the path of easy street. However, inheriting any large sum of money can bring about a lot of headaches that you would not otherwise have. If you are the beneficiary of a trust that has been left to you by a loved one, you will be facing some financial moves that you are responsible for taking but don't know about, especially where tax filing is concerned. Here is a look at a few of the tax concerns you should know about as a beneficiary of a trust.
It is possible that you will have to file a tax return for the trust.
It is a common misassumption that a trust left behind after a loved one passes away will not involve tax considerations for the beneficiary. However, there are some circumstances when you will have to file a trust tax return even though this is not technically income you have made. For example, if the trust earns some form of income more than $600 or if you are a non-legal alien as the beneficiary, you may be required to file a return at tax time.
Can you use money from the trust to pay for due taxes when you do have to file?
If you are the beneficiary of the trust, you may assume that the taxes owned if you have to file should be payable by the trust itself. Unfortunately, this is rarely the case. Most of the time, the beneficiary becomes responsible for any money owed to the IRS when filing the taxes for that money. This is especially the case when the trust is paid out to you as part of an estate settlement that involves more than one beneficiary.
Should you hire an attorney to help you with a trust tax return?
If you are the beneficiary of a complicated trust fund, getting the advice of an estate attorney is always a good option, but this is not necessary most of the time. Simply seek out a qualified tax professional who is familiar with filing trust tax returns and the stipulations of the process and you should have no trouble ensuring everything is completed in the right way. You can always ask an attorney for advice or guidance if you find yourself concerned, however.