SecondCor521
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My Mom died last year and some of my parents' assets ended up in a marital bypass/credit shelter trust.
This year the assets in the trust are generating income, and I've figured out that it makes sense to distribute most of that income to my Dad (the current beneficiary) because it'll get taxed preferentially on his return rather than the trust return.
The trust will still owe a small amount of taxes on the income that it retains. I can imagine two relatively easy ways to pay those taxes:
1. Withhold taxes from the distribution to my Dad. If we do this, is this something Vanguard can do? The trust and my Dad's other accounts are both at Vanguard and he can see them in his online login. I got the impression from talking with Vanguard that as far as their concerned, if my Dad wants to take a distribution, he just transfers money online from one account to the other.
2. Pay the taxes next April. I'm slightly worried about an underpayment penalty, but this is the first year that the trust will exist and owe taxes, so I'm hoping/guessing that the government will give us a pass.
This year the assets in the trust are generating income, and I've figured out that it makes sense to distribute most of that income to my Dad (the current beneficiary) because it'll get taxed preferentially on his return rather than the trust return.
The trust will still owe a small amount of taxes on the income that it retains. I can imagine two relatively easy ways to pay those taxes:
1. Withhold taxes from the distribution to my Dad. If we do this, is this something Vanguard can do? The trust and my Dad's other accounts are both at Vanguard and he can see them in his online login. I got the impression from talking with Vanguard that as far as their concerned, if my Dad wants to take a distribution, he just transfers money online from one account to the other.
2. Pay the taxes next April. I'm slightly worried about an underpayment penalty, but this is the first year that the trust will exist and owe taxes, so I'm hoping/guessing that the government will give us a pass.