Crabby Mike
Recycles dryer sheets
So just a heads-up for those of you involved with trusts in any way -- grantor, beneficiary, trustee, etc.
My adult "kids" are beneficiaries of a trust set up by their late Grandma (my ex-MIL), of which I am co-trustee. We just received their 2018 K-1s, which included an unpleasant surprise. Because the "Tax Cut and Jobs Act" eliminated deductibility of certain "miscellaneous expenses," their reported income jumped sharply from previous years, though actual income did not. While trustee and accounting fees are still deductible, "investment expenses" (brokerage fees and such) are not. In their case, the trust company we use charges 1% to manage the accounts, none of which was determined to be deductible by our accountant, which will result in their paying taxes on more than they received. Note that guidance from the IRS is still somewhat fuzzy on this, and different accountants may reach different conclusions.
I don't know what, if anything, we could do differently to avoid or lessen this impact, but it certainly could alter the math regarding whether to leave assets outright or in trust.
My adult "kids" are beneficiaries of a trust set up by their late Grandma (my ex-MIL), of which I am co-trustee. We just received their 2018 K-1s, which included an unpleasant surprise. Because the "Tax Cut and Jobs Act" eliminated deductibility of certain "miscellaneous expenses," their reported income jumped sharply from previous years, though actual income did not. While trustee and accounting fees are still deductible, "investment expenses" (brokerage fees and such) are not. In their case, the trust company we use charges 1% to manage the accounts, none of which was determined to be deductible by our accountant, which will result in their paying taxes on more than they received. Note that guidance from the IRS is still somewhat fuzzy on this, and different accountants may reach different conclusions.
I don't know what, if anything, we could do differently to avoid or lessen this impact, but it certainly could alter the math regarding whether to leave assets outright or in trust.