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Max W

Trust Distribution

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Decedent Irrevocable trust specified a 1/3rd distribution to the three beneficiaries.   The Executor, one of the beneficiaries decided to distribute his share to one of the others.  He had the consent, not written of the other two.  Effectively he changed the terms of the trust.  In some states, if not most, any change has to be approved by a probate judge.  The state in this case is CA.

I prepped the 1041 using the 1/3rd distribution, even though one got no money and another got 2/3rd's and they want the K-1's to reflect that.  Since I have to go by what the trust dictates, I don't think I should change it.  Am I right on this position?

TIA

 

 

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I'm going to shoot from the hip and say you're ok to do that because he had constructive receipt of the money and gave it to the other bene. I'd advise him to actually take the distribution next time and write a personal check for the gift. And I'd have him file a gift tax return this time if it's over the limit.

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2 hours ago, Abby Normal said:

I'm going to shoot from the hip and say you're ok to do that because he had constructive receipt of the money and gave it to the other bene. I'd advise him to actually take the distribution next time and write a personal check for the gift. And I'd have him file a gift tax return this time if it's over the limit.

I agree, it was a gift.  Distribution taxable to him under constructive income doctrine.

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On 4/16/2018 at 6:44 AM, Roberts said:

A beneficiary can refuse acceptance of their portion. They can't then dictate who gets their portion.

If they refuse to accept, what happens to the money?  Does it get reapportioned to the other beneficiaries, or does it stay in the trust?

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That would be a legal question of whether it is appointed to the other beneficiaries and or your own beneficiaries. The only time I've seen it done was with an only child and their kids were next in line. On trusts it isn't staying in the trust, someone is getting it.

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