Discretionary Trust Distributions: Minimizing Income Tax, Analyzing the Trust Document, Meeting Fiduciary Obligations

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A


Conducted on Wednesday, April 28, 2021

Recorded event now available

or call 1-800-926-7926
Course Materials

This course will assist trust advisers in determining when discretionary distributions can and should be made. Our panel of trust and estate veterans will discuss analyzing the trust document, determining income tax consequences, and the trustee's considerations before making discretionary distributions.

Description

Making trust distributions can often reduce the overall taxation of beneficiaries and trusts. For trusts, the 2020 top tax rate of 37 percent begins at a mere $12,951, while the top individual income tax rate of 37 percent begins at $518,401 for single taxpayers. Trusts are also subject to the additional 3.8 percent net investment income tax. Distributions to beneficiaries can be made during the year and up to 65 days after year-end by Section 663(b) election.

Trust instruments guide distributions, including limitations and discretionary powers. Distributions are commonly allowed and exercised for HEMS-- health, education, maintenance, and beneficiary support. At the same time, trusts are formed to protect and preserve assets. Trustees sometimes struggle to meet fiduciary standards while exercising distribution powers. Trustees and trust advisers must weigh the loss of asset protection and estate tax consequences of discretionary distributions against potential income tax savings.

Trust and estate advisers must analyze the trust documents, tax consequences, and fiduciary obligations to determine when discretionary distributions can and should be made.

Listen as our panel of fiduciary experts explains mandatory vs. discretionary distribution, common trust distribution clauses, and meeting fiduciary duties to provide the best outcome for a trust and its beneficiaries.

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Outline

  1. Types of trusts
  2. Types of distributions
  3. Fiduciary standards
  4. Income tax consequences
  5. Section 663(b) 65-day election
  6. Caveats and considerations

Benefits

The panel will review these and other key issues:

  • Minimizing income taxes paid by trusts and beneficiaries
  • Interpreting trust distribution clauses
  • Electing to include after-year distributions in the current year under Section 663(b)
  • What distributions qualify as HEMS distributions?
  • Non-tax considerations before making discretionary distributions

Faculty

Bridgers, Griffin
Griffin H. Bridgers

Attorney
Hutchins & Associates

Mr. Bridgers' practice encompasses all areas of private wealth and family business. In addition to estate...  |  Read More

Ikard, Frank
Frank N. Ikard, Jr.

Shareholder
Ikard Law

Mr. Ikard’s practice is dedicated entirely to fiduciary litigation and trust administration matters. He has been...  |  Read More

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