Re: Trust income distribution


"paul e" <elliott.paule@xxxxxxxxx> wrote
I am a successor trustee to my Father's trust, since he passed away in
December. One of my duties is to make sure all net income the trust
earns is distributed to the beneficiary, ie, my mom.

There are various expenses I plan on paying with this income, ie, real
estate and other taxes, and other costs incurred by properties held by
the trust.. I plan on paying any income that remains after the
expenses are paid, to mom, as called for in the trust document.

Here's my question. The wording in the document says that I should
pay the net income either monthly, or quarterly. I get the sense Im
expected to pay it on some 'regular' basis. But, the problem is, the
expenses payable by the trust arent necessarily billed on this same
'regular' basis. I dont want to pay all the income that the trust
earns every quarter, if the 4th quarter features so many expenses,
that there is not enough income in the 4th quarter to pay large
anticipated 4th quarter expenses. To handle such expenses, I would
think I should be saving money in the trust account in anticipation of
late year expenses. My main goal should be, I would think, to make
sure that, on the last day of the year, there is no money in the
account.. IF that means paying any moneys in the account to my mom on
the last day of the year, then so be it. That I believe is the
spirit of the document.

In a way, the trust wording sets up a Paradox, by stating that the net
income should be paid out quarterly, when doing so would not leave
enough money in the account to pay late year expenses that would have
required saving up during the year because they may be larger than any
single quarter's income.

I just want to check that it is ok to not pay out income quarterly,
when late year expenses that the trust is expected to pay, requires
that the money be saved and accumulated from one quarter to the next.

hoping i didnt confuse anybody with this question...




Well, as mentioned in the other posts, talk to the attorney and CPA.

That being said, the terms of the trust are more legal than practical, and
that means that all the net income will flow to the beneficiary (your mom)
almost regardless of what actually gets paid out. Often times you don't
have the cash to pay out the earnings, and other times you have more cash
than earnings. I doubt the trust is worded in such a way that if the trust
earned $5000 this month/quarter, you absolutely have to write a check for
that $5000. What it does mean is that mom picks up $5000 as income (the
same type of income in which the trust earned it).




--

Paul A. Thomas, CPA
Athens, Georgia













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