Top 10 Trust Tax Tips


Top 10 Trust Tax Tips

By Casie Stephens, Trust Specialist III

Tax season is upon us! MSNT is available for trust questions, but we are not tax accounting specialists and cannot give advice. Whether you have been a Life Beneficiary or Co-Trustee for years or are brand new to MSNT, here are some key facts about special needs trusts and taxes:

1. Life Beneficiaries are responsible for filing their own personal tax returns.

2. MSNT is responsible for filing the trust tax returns for all irrevocable MSNT trusts.

3. First Party trusts and some Third Party trusts are irrevocable and are a separate tax entity. MSNT obtains a trust tax identification number when an irrevocable trust is opened.

4. MSNT may require additional information about the source of funds for tax accounting purposes. Any 1099 or Schedule K-1 for the initial or subsequent deposits to the trust, should be forwarded to MSNT as soon as possible.

5. MSNT contracts with an accounting firm to review all irrevocable trusts to determine if a tax return is required and, if required, to prepare the tax returns.

6. Tax preparation fees are paid by the trust and reported on the trust account statement.

7. If a tax return is required, a Schedule K-1 will be issued for the Life Beneficiary to file with their personal tax returns. The Schedule K-1 should be provided to the Life Beneficiary’s tax advisor.

8. Schedule K-1s will be sent in February to the designated Co-Trustee, Life Beneficiary, or legal representative. MSNT recommends the Life Beneficiary file personal tax returns after receiving the Schedule K-1 to avoid an amended return.

9. Third party revocable trust donors are responsible for filing their own personal tax returns and the third party revocable trust taxes. In both instances, they will be filed with the individual’s social security number.

10. A 1099 is sent to the donor(s) of Third Party revocable trusts.