If I make a distribution from a trust set up for my sons by doing an EFT from the trust to my checking account and then to them, what are the tax implications?

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If I make a distribution from a trust set up for my sons by doing an EFT from the trust to my checking account and then to them, what are the tax implications?

My late father set up a trust for my sons for which I am trustee. I am making a distribution to one of them. The easiest way for me to do that is to do an EFT from the trust to my personal checking account and then immediately on to my son’s but Im concerned about a possible tax impact to me. Is there one?

Asked on December 26, 2011 under Estate Planning, Massachusetts

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Distribution of trust assets to beneficiaries are typically gifts and are tax free transfers (just like a bequest under a Will or an intestate proceeding). From what you have written about the electronic funds transfer (EFT) from the trust to your checking account and then to your son, there should be no tax ramifications to you or your son.

Rather any income generated from the trust assets be it through investments, accrued interest, dividends and the like would be reported on the trust's federal and state income tax returns.

Make sure you have documentation tracing the distribution of the money to you and then to your son as the beneficiary of the trust for safe keeping since you are the trustee under the trust.


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