Discussion:State of Trust

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Discussion Forum Index --> Basic Tax Questions --> State of Trust


Discussion Forum Index --> Tax Questions --> State of Trust

CREA (talk|edits) said:

8 October 2012
If an irrevocable trust is set up under one state's law then the trustee subsequently moves to another state and dies in the new state, what state's Unified Principal and Income Act would I use for the preparation of the 1041? I was thinking the state in which the decedant passed away because that is when the trust becomes irrevocable. I was wondering if someone could let me know if this is correct please?

Dennis (talk|edits) said:

8 October 2012
Shouldn't make much of a difference, but in general the document will contain language specific to the state in which the trust was drafted. Your problem is more likely to be the state of residence for trust taxation purpose. Could be two...♫

CREA (talk|edits) said:

8 October 2012
Thanks Dennis, I have read some of your trust answers in other posts. You are right, there is not much difference, it's for Florida (State of residence) and California (drafted state) and my concern was with a total distribution of an IRA and how to allocate between P&I but the states are only slightly different. The Trustee withdrew the money 100% because he thought inherited assets are not taxed.

EasternPA (talk|edits) said:

9 October 2012
Alas, what Death giveth, the Taxman taketh away.

Michaelstar (talk|edits) said:

9 October 2012
Okay Dennis - I have a couple of questions on this one.

First ? "If an irrevocable trust is set up under one state's law then the trustee subsequently moves to another state" - would seem to me that we started out with a revocable trust - correct?

Second ? "I was thinking the state in which the decedant passed away because that is when the trust becomes irrevocable" - okay - now grantor died - trust NOW becomes irrevocable based on the OP's comment. Trust document will have named a successor trustee - this was not really a ? - just a statement as to how I think things would have gone....... Of course, it could have been an irrevocable trust before the grantor died but that is not how I am reading the OP's post.

If successor trustee is a CA resident - we have a CA filing requirement. The fact that the grantor died in Fl - how would that have any impact if the successor Trustee is a CA resident?

Since the trustee (I gather the successor trustee) withdrew the $$ from the trust (hopefully in time) then there should not be any tax at the trust level.

Dennis (talk|edits) said:

9 October 2012
Grantor trust matters, revocable/irrevocable does not. For purpose of state taxation you can end up with the trust subject to filing requirements in multiple or even no states. The Trust is a legal document and is generally drafted under the laws of a particular state. Typically there will be language to that effect.

CREA (talk|edits) said:

9 October 2012
Michaelstar, when you mention "withdrew the $$ from the trust (hopefully in time)", are you talking about the Sept 30 deadline to transfer to separate accounts? I was using Florida's UPIA that indicates that 10% of the distribution is income and 90% of the distribution is principal to the trust (trust is beneficiary), thereby 90% taxed at the trust level. Are you saying that because the money was distributed and not kept in the trust, it is all income to the beneficiaries?

Dennis (talk|edits) said:

9 October 2012
Accounting income and taxable income are two different things. The distribution deduction includes all distributions.

Ckenefick (talk|edits) said:

10 October 2012
http://www.naepc.org/journal/issue08d.pdf

I refer to this from time to time.

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