DGAA bLAWg

How Is Exculpation of Trustees Addressed Under the New Illinois Trust Code?

Web Admin - Monday, December 30, 2019
Mount Prospect estate planning lawyer Illinois Trust CodeAs the new year begins, many trust owners (grantors) and trustees are familiarizing themselves with the Illinois Trust Code. As of January 1st, 2020, Illinois has adopted a new set of governing rules over trusts that will be linked to the Uniform Trust Code (UTC). This law involves many changes and updates to the rules surrounding trusts, and one area that has been affected is the modification of exculpation clauses. Moving forward, both grantors and trustees should consult a legal professional to either create, adjust, or better understand their trusts. 

What Does Exculpation of a Trustee Mean?


An exculpatory clause is a provision that can be added to a trust that would relieve a designated individual from responsibility for certain actions. Under the Illinois Trust Code, the exculpation of a trustee would relieve him or her of any liability for a breach of the trust. However, trust relieving will be unenforceable if it is determined that the exculpatory term:

- Absolves a trustee of liability that is committed with deceitful intentions or with carelessness to the purpose of the trust or the interests of the beneficiaries.
- Was inserted because of a trustee’s abuse of a legal or confidential relationship with the grantor. 

Unless the trustee can prove that the exculpatory term was justified under the current situation and that it was adequately communicated to the grantor, the term will be found invalid. For example, if a trustee purposefully acted in a way that was determined to be against the trust in an effort to benefit themselves, that trustee could be responsible for his or her actions.

What Is Changing?


Under previous Illinois law, a grantor of a trust was able to exonerate a trustee from personal liability by including an exculpatory clause into the trust. Although exculpatory clauses can still be used under the Illinois Trust Code, there is now a presumption that they will be found invalid if the trustee created or forced the clause to be added. In order to prove that an exculpatory clause is legitimate, a trust maker should be represented by a third-party counsel during the drafting of the trust.

Contact a Riverwoods Estate Planning Attorney


Due to the significant changes that have been implemented under the Illinois Trust Code, it is important for trust makers and trustees to understand the new policies. If you wish to add an exculpatory clause, or if there has been a breach in your trust, you should work with an attorney to determine your legal options. At Drost, Gilbert, Andrew & Apicella, LLC, our experienced Barrington trust lawyers can work with you to ensure your trust meets the requirements of Illinois law. For a free consultation, call our office today at 847-934-6000.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


Sources:
http://www.ilga.gov/legislation/ilcs/ilcs5.asp?ActID=4001&ChapterID=61

What Is a Nonjudicial Settlement Agreement in Relation to the ITC?

Web Admin - Thursday, November 07, 2019
Riverwoods estate planning lawyer trustsA trust can provide a person with the ability to protect and manage their assets and distribute them to beneficiaries either before or after their death. When a person creates a trust, they will name a trustee who will be responsible for controlling and managing the property or assets held in the trust. These appointed agents are legally required by the Illinois Trust Code (ITC) to fulfill the duties authorized to them, such as distributing possessions or managing an estate. If disputes arise between a trust’s beneficiaries, a trustee, or any other interested persons, the parties may enter into a nonjudicial settlement agreement to modify the terms of the trust. Before any actions or alterations are enacted, it is important to speak to an experienced trust attorney.  

What Can Be Resolved By a Nonjudicial Settlement Agreement 


Under the ITC, a nonjudicial settlement agreement can address the following subjects:
- The lawfulness and clarification of the terms attached to a trust.
- Approval of a designated agent’s actions.
- The powers which can or cannot be exercised by a trustee, as long as they do not conflict with the purpose of the trust.
- Concerns relating to property held by the trust if the settlement does not conflict with the purpose of the trust.
- The act of removing or appointing a trustee, advisor, or any other delegated representative of financial or nonfinancial powers. This may also include choosing a new successor trustee. 
- The financial compensation that can be provided to a trustee.
- The transfer of a trust’s principal place of administration.
- Accountability of a designated agent for his or her actions relating to the trust.
- The actions taken to resolve disputes related to the administration of the trust, the distribution of assets, or other relevant issues.
- A modification of the terms that relate to the administration of the trust. 
- If a trust is severed into two or more trusts, determination of whether the aggregate interests of each beneficiary are equivalent to their interests before severance.
- The termination of a trust, which can only occur if a court finds that the continuance of the trust is not necessary to achieve the trust’s purpose.

Contact a Long Grove Trusts Attorney


Before the ITC is enacted on January 1st, 2020, it is critical for trust settlors, trustees, and beneficiaries to discuss any possible changes that may need to take place. In order to make sure that your rights are protected, you should work with an experienced attorney who understands the laws regarding trusts in Illinois. At Drost, Gilbert, Andrew & Apicella, our Kenilworth estate planning lawyers can provide clarification in your specific situation. To schedule a free consultation, contact our office today at 847-934-6000.  

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


Sources:

http://www.ilga.gov/legislation/ilcs/ilcs5.asp?ActID=4001&ChapterID=61

What Types of Charitable Trusts Can I Use in My Estate Plan?

Web Admin - Friday, May 31, 2019
Kenilworth charitable trusts attorneyA trust is a legal agreement created by the owner of assets or property that designates an individual (a trustee) to manage the assets and distribute them to the beneficiaries named in the trust. Assets can be distributed either during the life of the person who creates the trust (known as the grantor) or after their death. In many cases, a grantor chooses to pass their assets to relatives or close friends; however, some may also wish to support a cause they believe in by naming a charity as a beneficiary. In these cases, charitable trusts can be used, and they typically fall into one of two categories: charitable lead trusts and charitable remainder trusts.

Charitable Lead Trusts


This type of charitable trust has a time limit tied to the funding that is provided to one or more charities. Once the time period ends, the rest of the assets are given to non-charitable beneficiaries. The process begins with an initial donation to fund the trust. Charitable lead trusts do not require a minimum or maximum charitable payment amount, and a grantor may prefer to make a cash contribution to be eligible for immediate tax deductions. The payments will then be sent to at least one charity of the grantor’s choosing. This must be done at least once a year for a specific number of years or for the remainder of the lifespan of the grantor. Once the trust’s term has ended, the rest of the funds are given to the beneficiaries chosen by the grantor.

Charitable Remainder Trusts


Many will choose charitable remainder trusts because they can provide regular income for the grantor or their beneficiaries in addition to donating assets to charity. This type of trust is almost the exact opposite of a lead trust, with assets being distributed to beneficiaries during the term of the trust, and any remaining assets being donated to charity after the grantor’s death. 

The first step in creating a charitable remainder trust is making a partially tax-deductible donation. This can include cash, stocks, real estate, or private business interests. During the term of the trust or the remainder of the grantor’s life, assets held in the trust may be distributed to beneficiaries, such as the grantor’s loved ones or even the grantor themselves. Beneficiaries can receive income only once per year or as frequently as every month. After the grantor’s death, the selected charity or charities will receive the remainder of the assets. 

Contact an Arlington Heights Charitable Trusts Lawyer


Estate planning is an extremely complicated process that requires extensive attention to detail. While charitable trusts can provide a number of benefits, it is important to ensure that the correct steps are followed when creating this type of trust. At Drost, Gilbert, Andrew & Apicella, LLC, we can help you determine which trusts will be best for you and your beneficiaries. Contact a Long Grove estate planning attorney at 847-934-6000 for a free consultation.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


Sources: 
https://www.fidelitycharitable.org/philanthropy/charitable-lead-trusts.shtml
https://www.fidelitycharitable.org/philanthropy/charitable-remainder-trusts.shtml 


3 Reasons Why a Living Trust Is More Beneficial Than Just a Will

Web Admin - Wednesday, January 23, 2019
Des Plaines living trust lawyerIf you wish to leave a legacy to your children or other beneficiaries after your death, it is imperative that you have an estate plan that will ensure prompt and accurate distribution of your assets. Many people think that writing a will is the best way to do this. However, while a will is important, putting your assets into a revocable living trust can provide several additional benefits.

Avoid the Illinois Probate Process 


In order to distribute assets according to the terms of a will, the will must go through the probate process. This involves filing various court documents required by law to establish the value of each asset and to re-title each asset from the deceased’s name to the recipient’s name. This can be a long, drawn-out process.

Secure Adult Heirs’ Immediate Access to the Estate


One of probate’s most serious drawbacks is the freezing of assets. Specifically, any assets that are held solely in the name of the deceased are frozen upon their death. Imagine a married couple who amassed several large investment and retirement accounts and multiple pieces of real estate during their lifetime. Upon the death of both spouses, their children cannot touch any of the assets until a probate court judge approves the will and appoints a Personal Representative to handle the estate. Leaving large investment accounts without active management can be risky.

By comparison, imagine that all of the couple’s assets had been placed in a living trust, meaning that the assets are titled in the name of the trust rather than in the name of any individual. Upon the death of the trust-maker, their designated successor has immediate access to the assets of the trust.

Secure Assets for the Long-Term Benefit of the Family


Imagine our married couple has three children and has a will. Upon the death of both spouses and probate action, the assets of the estate must be divided amongst the named heirs. Assuming the estate is to be divided equally among the three children, the inherited assets are now at risk to creditors, bankruptcy, a lawsuit, or a divorce. 

Creditors. If the married couple had all of their assets in a trust, ownership of those assets can remain titled in the name of the trust indefinitely. Because the assets are not titled in the individual children’s names, the assets are protected from creditors, even if one child files for bankruptcy or gets divorced. The beneficiaries named in the trust will have access to the assets in accordance with the directions specified in the trust documents. 

Heirs with disabilities. Upon the death of the spouses, one child (or an objective third party such as a bank) could be named as the successor trustee with directions to manage the trust in a certain way. This approach can be used to ensure that the use of the assets is prioritized in some way, such as to meet the basic needs of a child or grandchild with a disability. Keeping the assets in the trust can also serve to protect the right of a disabled heir to receive needs-based government benefits.

Underage heirs. Keeping the trust open with a successor trustee can also be beneficial for heirs who have not yet reached adulthood. When a will leaves assets to a minor, the probate court must appoint a conservator to manage the minor’s assets. Once our fictional married couple has died, there is no telling who that conservator might be and what decisions they might make. In contrast, assets left in a trust can be managed according to specific directions written into the trust. Thus, the maker of the trust can dictate when and for what purposes a youthful (or even as-yet unborn) heir can access their inheritance.

Consult a Palatine Revocable Living Trust Lawyer


A well-thought-out living trust can give you greater peace of mind and benefit your heirs in the long run. To discuss options for writing or updating a living trust, call an experienced Schaumburg living trust attorney at Drost, Gilbert, Andrew & Apicella, LLC. We have prepared living trusts for many high-asset families with complex issues of inheritance. To set up a free initial consultation, call 847-934-6000.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


Sources:
https://www.isba.org/public/guide/livingtrust

Are Holiday Gifts Subject to Federal Gift Tax?

Web Admin - Thursday, December 21, 2017
Barrington estate planning and tax lawyerThe holiday season is a time of giving, but as you celebrate this time with your family and friends, you may need to be aware of a certain omnipresent aspect of American life: taxes. While it will likely only apply to people who earn a high income or have large financial assets, it is still a good idea to understand the Federal gift tax and the impact it may have on the gifts you give and your estate.

What Is the Gift Tax?

When a person transfers property to someone else without receiving something of equal value in return, this is considered a gift by the Internal Revenue Service (IRS), and it may be subject to gift taxes. The person who gives the gift to someone else (known as the donor) is responsible for filing tax forms for the gift and paying the gift tax.

Gift Tax Exclusions

Certain types of gifts are excluded from taxes, including gifts given to one’s spouse, gifts given to a political organization, and tuition or medical expenses paid on someone’s behalf. For other gifts, an annual exclusion threshold applies. That threshold is $14,000 for 2017, and the threshold for 2018 will be $15,000.

The annual exclusion applies to gifts given to an individual person, so if a donor gives multiple people gifts of less than $14,000 each, they will not owe any gift taxes. For spouses, the exclusion is doubled, so a married couple can give a gift of up to $28,000 without owing gift taxes.

In addition to the annual exclusion, everyone is entitled to a lifetime exemption known as the basic tax exemption. For people who die in 2017, that exemption is $5,490,000, and in 2018, the exemption will increase to $5,600,000. The taxable amount of gifts greater than the annual gift tax exclusion threshold can be applied toward this lifetime exemption, and taxes will not be owed on these gifts. However, any amount of the basic exemption used during one’s lifetime will be deducted from the amount of their estate that is exempt from estate taxes upon their death.

Contact a Schaumburg Estate Planning Attorney

Determining how gift taxes will affect your finances and your estate can be a complex undertaking. If you want to make sure you are protecting yourself and providing for your family’s financial security, the skilled attorneys at Drost, Gilbert, Andrew & Apicella, LLC can work with you to ensure you have met your legal requirements and have the financial resources in place that your family needs. Contact our Rolling Meadows estate planning attorneys today at 847-934-6000 to schedule a personalized consultation.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.



Source:
https://www.irs.gov/businesses/small-businesses-self-employed/estate-and-gift-taxes

Forcible Entry and Detainer Actions

Web Admin - Friday, October 09, 2015

Illinois real estate attorney, forcible entry, eviction noticeIn some disputes involving a rental of property, it is possible for a landlord to evict a tenant. In order to successfully evict a tenant, the landlord must comply with the laws governing eviction proceedings. These laws are intended to provide for a means of obtaining evictions, while simultaneously protecting tenants from unjustified eviction attempts. 

Eviction Process 

Pursuant to Illinois law, under certain circumstances, it is possible for a landlord to file a claim, known as a forcible entry and detainer lawsuit, to evict a tenant. Some of the reasons a landlord may be justified in seeking eviction include, but are not limited to, the following: 

1. Failure to pay rent;

2. Violation of the lease terms; or

3. Remaining in the property after the agreed upon lease term has passed. 

In some cases when issues arise, the tenant may voluntarily leave the property. However, if the tenant refuses to relinquish the property, the landlord may be forced to file a forcible entry and detainer lawsuit to initiate eviction proceedings. The first step in the process is to serve notice on the tenant of the intention to terminate the lease. The best way to satisfy the service requirement is to personally hand the tenant the notice. Alternatively, it can be left with someone that lives in the property who is at least 13 years of age. The notice requirement is not satisfied if the notice is left with a guest or visitor to the property. 

If personal notice is not possible, constructive notice is also sufficient. Constructive notice can be accomplished by mailing it by certified or registered mail, return receipt requested. If there is no one in actual possession of the property, the notice can be attached to the property. After notice has been properly served and the issue has not been corrected or the tenant has not moved out, the lawsuit to evict can be filed.

A forcible entry and detainer claim seeks to obtain an “Order for Possession” from the court, which grants the landlord the right to take possession of the property. If the Order for Possession is granted, in most cases, the court will also grant a “stay of enforcement” in order to give the tenant time to find a new place to live. After the stay expires, the Sheriff’s Department will assist the landlord in removing the tenant from the property. 

In addition to the claim for the property, the landlord can join a claim to obtain rent due. However, if constructive notice was used to satisfy the service requirement and the tenant does not appear, the court can only rule on the possession claim and not whether any rent should be paid to the landlord. If the possession claim is decided, it is final, enforceable, and appealable. If the landlord wishes to continue with the rent claim, it remains pending. 

Real Estate Attorneys

Unfortunately, disputes between landlords and tenants do arise. When those issues are significant enough, eviction of the tenant may be sought. If you have questions about the rental of property, contact an experienced Illinois real estate attorney today. Our firm provides representation for individuals located throughout the northwest suburbs, including the communities of Long Grove, Arlington Heights, Schaumburg, Palatine, Inverness, Kenilworth, Riverwoods, Barrington, South Barrington, and Mount Prospect. 

About the Author: Founding partner of Drost, Gilbert, Andrew & Apicella, LLC, Colin Gilbert, received his J.D. from Chicago-Kent College of law in 2005. Colin argues cases across many practice areas including criminal defense, collections, civil litigation, real estate law, and corporate law. Colin is an active member of the Board of Governors of the Northwest Suburban Bar Association and the Illinois Creditors Bar Association. He is currently Vice President of the Arlington Heights Chamber of Commerce, and is a Commissioner for the Village of Arlington Heights. Colin has a 10.0 Attorney rating on Avvo, and was named one of the 2014 “Top 40 Under 40” Trial Lawyers in Illinois by the National Trial Lawyers Association.

Source:

http://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=073500050HArt%2E+IX&ActID=2017&ChapterID=56&SeqStart=66600000&SeqEnd=74400000


Importance of Funding Your Living Trust

Web Admin - Friday, September 25, 2015

funding your living trust, Illinois estate planning attorney

The creation of living trusts in order to transfer property to beneficiaries is becoming increasingly popular. One of the major benefits of using a living trust is the avoidance of probate. However, if the maker of the trust (called the grantor) does not actually fund the trust with property or other assets, the grantor’s estate will likely have to go through probate. 

Living Trusts 

A revocable living trust is a form of estate planning that allows a grantor to determine who gets his or her property upon their death. A trust that is revocable can be altered, changed, or revoked during the life of the grantor. Upon the grantor’s death, the trust becomes irrevocable. After the trust becomes irrevocable, it cannot be changed and the trustee must follow the distribution plan made by the grantor. Alternatively, an irrevocable living trust is one that cannot be revoked once it is finalized. Both of these forms of trusts are called “living” trusts because they are formed during the life of the grantor. 

Living trusts provide the benefit of the avoidance of probate, which is a court process in which a determination is made as to how property is distributed upon the death of an individual. Probate, which is governed under Illinois law by the Probate Act of 1975, is often expensive and time-consuming. Additionally, it often means that property is not divided in accordance with how the deceased individual would have desired. 

In order to avoid probate, the grantor must correctly form the trust and fund the trust. A trust is formed through the creation of a written trust document that is signed by the creator of the trust and a notary public. The trust document must include a list of the property that is covered by the trust, name a trustee, and name the beneficiaries of the property included in the trust. 

The grantor must transfer the property that is to be covered by the trust into the trust. For most property, a trust is funded simply by including a list of covered property in the trust document. However, real estate must be retitled in the name of the trust in order to be correctly transferred. A trust that has not had assets properly transferred to it is called an unfunded living trust. 

Unfortunately, it is not uncommon for grantors to fail to fund their trust. This may occur when a grantor plans to get around to it in the future but never actually does it. Alternatively, a grantor may incorrectly believe that the creation of the trust document was sufficient. For example, in the case of real estate, the creation of the trust document is not enough due to the retitling rule. If a trust is not properly funded, the goals of the estate plan will not be achieved and the estate will have to go through probate. 

Help with Estate Planning 

Planning for what will happen to your property and assets is important for you and your loved ones. If you would like more information or help in forming a living trust, contact an experienced Illinois estate planning attorney today. Our firm proudly serves the communities of Inverness, Palatine, Schaumburg, Arlington Heights, Long Grove, Kenilworth, Riverwoods, Barrington, South Barrington, and Mount Prospect.

About the Author:

Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


Source:

http://www.ilga.gov/legislation/ilcs/ilcs5.asp?ActID=2104&ChapterID=60


'Tis the Season... for Gift Taxes

Web Admin - Tuesday, December 16, 2014

Illinois gift tax, Arlington Heights estate planning attorneyOnce again, it is that time of year, the time when families get together to exchange gifts, and spend quality time together. During this season, people do not ordinarily consider their taxes. After all, the middle of winter is almost as far away from April 15th as someone can get. Nevertheless, the gifts people give during this time of year can have a long-term impact on their tax situation thanks to the gift tax. Gift giving during a person's life is often a good way for someone to avoid estate taxes, so careful planning around this time of year can leave someone's family in a much better financial position.

What Gift Givers Should Know

Gift givers are the ones most on the hook for understanding the tax law when dealing with gifts. The most important thing for gift givers to understand is the fact that they are working under two separate but related gift giving limits. The first limit is known as the annual gift tax exclusion. This is the amount per year that any gift giver may give to any single person. The IRS has set that exclusion at $14,000 for both 2014 and 2015. If a person goes over that limit, then he or she must file a gift tax return. However, this does not necessarily mean that he or she must pay any taxes on the gift.

Filing a gift tax return triggers the second limit that gift givers are working under, the lifetime exemption. The lifetime exemption is the total amount of money that gift givers are allowed to give away over their yearly exemption before they start to owe taxes. The current lifetime exemption is $5.34 million. This means that if a person gives away $20,000 to a single person in a single year, then he or she must subtract $6,000 from his or her lifetime exemption. This is especially important because the lifetime exemption never resets and applies to estate taxes as well. For example, if a person gives away enough during his or her lifetime that he or she has used up $2.34 million of his or her lifetime exemption, then only the first $3 million of his or her estate's distributions are tax free. The rest may be subject to a tax rate of up to 40 percent.

What Receivers Should Know

Gift receivers have a much simpler set of rules to work under. Ordinarily, the gift giver pays the gift tax, and the receiver does not have to worry. If the person giving the gift does not pay the tax, then the IRS may come after the receiver, but usually people giving money in excess of the annual exclusion can also cover the gift tax. Additionally, people receiving five or six figure sums from foreign sources may also have to report that.

Tax day may come but once a year, but tax planning is a year round problem. If you have questions about how best to manage your estate, contact an Arlington Heights estate planning attorney today. The law firm of Drost, Gilbert, Andrew & Apicella, LLC serves clients in many northwest suburbs including Palatine, Schaumburg, Barrington, Inverness, Mount Prospect, Long Grove, Kenilworth, Riverwood, and South Barrington.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.

Trust Payments and the Capital Gains Tax

Web Admin - Wednesday, August 27, 2014

capital gains tax in IllinoisThe capital gains tax exists as a way for the government to tax the income that flows to investors from certain investments. In general, the capital gains tax applies to the sale of most assets other than inventory. This includes the sale of things like stocks, bonds, and real estate. The current capital gains tax rates vary depending on a person's income bracket. According to the IRS, the capital gains tax for people in the 25 percent, 28, percent, 33 percent, and 35 percent income tax brackets would be 15 percent.

People paying taxes in the highest bracket, 39.6 percent, would pay 20 percent in capital gains tax, and people in the other, lower tax brackets do not pay capital gains tax at all for most capital gains income. Additionally, the Affordable Care Act also introduced a further 3.8 percent tax on capital gains income for people earning either $200,000 a year as single filers, or $250,000 a year as married filers, which went into effect at the start of 2013.

This capital gains tax can interact with trusts in complex ways, and trustees should be aware of the issues created by the capital gains tax and trusts. First, trustees should be aware of how capital gains affects the way that they manage K-1 tax forms. Second, trustees should keep in mind the interaction between capital gains and the income distribution tax deduction that trusts are allowed to take.

K-1 Forms

K-1 forms are a type of tax form that exists to help the owners of pass through entities fill out their personal income tax returns. Pass through entities are entities like S corporations and some LLCs that do not pay taxes themselves, but instead pass the taxes on to the owners. Trusts, strictly speaking, are not actually pass through entities since the trust is responsible for paying some taxes, but the beneficiaries may also owe taxes based on distributions to them from the trust, so they often receive a K-1 form. As far as the need to report capital gains income on a K-1 form, that depends on the specifics of the trust. As a default rule, the capital gains and losses stay with the trust itself, but the trust instrument may choose to pass those along to the beneficiaries, which would result in the trustee needing to add them to the K-1 form.

Capital Gains and the Income Distribution Deduction

Capital gains may also have an effect on the trust's income distribution deduction, a tax deduction that trusts may take for amounts paid to an income beneficiary. The income distribution deduction is equal to the lesser of either (1) the distributions minus tax-exempt income or (2) the “distributable net income” minus tax exempt income. Capital gains may affect this distribution because it figures into the calculation of distributable net income under several circumstances, most commonly if the trust requires the trustee to distribute the gains to the beneficiaries.

Managing a trust is a complex task from both a legal and financial perspective. If you have questions, seek help from an experienced Illinois estate planning attorney. Our firm's skilled lawyers serve clients in many northwest suburban towns such as Inverness, Barrington, and Kenilworth.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


Recent Posts


Tags

Attorney Ken Apicella Long Grove estate planning traumatic brain injury minimum wage Deer Park DUI lawyer Schaumburg estate planning lawyer traffic violations dog bites Arlington Heights wills and trusts attorneys trauma after an accident Rolling Meadows corporate lawyer Crystal Lake criminal defense attorney Arlington Heights criminal lawyer drug possession child safety Crystal Lake personal injury attorney changes to mortgage law landlord tenant law Rolling Meadows employment law attorney workers compensation benefits Employment Discrimination Law Des Plaines pet law attorney Inverness real estate lawyer Illinois Smoke Detector Act driving Home Remodeling Repair Act drug crimes lawyer Detainer Actions estate planning trusts Rolling Meadows litigation lawyer internet digital media accounts, estate planning, Arlington Heights estate planning attorney, elder law Schaumburg traffic lawyer Inverness injury lawyer Crystal Lake car accident attorney IRA benefits DGAA rumble strips texting while driving Chicago trucking accident attorney controlled substance comp time income distribution deducation Crystal Lake traffic lawyer Des Plaines tax law firm first degree murder wrongful termination Illinois red light cameras insurance dispute Crystal lake insurance dispute attorney Palatine elder law attorney Illinois employment law attorneys Schaumburg employment law attorneys Deer Park motorcycle accident lawyer Illinois Illinois personal injury Illinois elder law attorney natural gas Long Grove real estate lawyer pedestrian accidents preventing accidents Palatine trusts lawyer Illinois lawyer life insurance insurance claim delay Class A misdemeanor Arlington Heights employment law attorneys Fair Labor Standards Act Illinois real estate lawyer gift tax exemption, estate planning, estate planning strategies, Illinois estate planning, South Barrington estate planning attorneys problem employees Illinois traffic ticket lawyer car collision right to work Illinois medical malpractice case Illinois medical malpractice claim Deer Park criminal attorney Long Grove estate planning attorney fiduciary rule delay employment contract, employment law, employment at-will, Deer Park employment law attorneys, contract, field sobriety test Crystal Lake law firm license reinstatement icy parking lots Crystal Lake pet attorney slip and fall accidents anesthesia errors healthcare denied insurance claim Schaumburg civil litigation attorney special needs trust Colin Gilbert car accidents Rolling Meadows insurance attorney Schaumburg corporate attorney Deer Park traffic accident attorney Schaumburg medical malpractice lawyer Barrington civil litigation attorney insurance adjusters rollover car crashes Buffalo Grove real estate attorney DUI penalities dealing with problem employees Barrington business law firm accidental death benefits license revocation Illinois pet lawyer Exclusions Deer Park real estate law firm Des Plaines drug lawyer eluding a police officer reckless homicide Illinois wills and trusts attorneys fatal car accidents boating accidents Rolling Meadows personal injury attorney institutional trustee Mount Prospect wills and trusts lawyers Illinois estate planning attorney car accident lawyers Des Plaines drug crimes lawyer construction accidents Arlington Heights Attorney Palatine employment law lawyer medical malpractice surgical mistakes workers compensation crossover accidents Deer Park employment law attorney Buffalo Grove medical malpractice lawyers holiday statistics employment attorney Des Plaines accident attorney rest breaks foreclosed rental property criminal Palatine civil litigation lawyer Des Plaines insurance attorney financial advisors insurance agent negligence rollover accidents personal injury lawyer revenge porn Chicago insurance law firm Schaumburg Arlington Heights lawyer Home Sale Contingencies Schaumburg construction accident lawyer Des Plaines personal injury attorney Inverness personal injury attorney Illinois LLC creation Chicago will attorney, social media platforms, Illinois estate planning lawyer, Rolling Meadows Traffic Lawyer Buffalo Grove criminal defense lawyer products liability Legal Info Illinois business law atorneys severance agreements Illinois rollover accident lawyers Retaliatory Discharge Inverness traffic law firm mass shooting estate planning, death tax, succession plans, business estate plans, Barrington estate planning lawyers DNR Barrington real estate lawyer Illinois boating accident lawyer work unions Illinois traffic laws Arlington Heights tax lawyer Food and Drug Administration's Food Safety Modernization Act deed transfer ACA guardianship attorney Illinois defective products attorney marijuana crimes attorney employment law, meal breaks, rest breaks, hotel employees, Des Plaines employment law attorneys civil rights violation insurance claim dispute attorney Illinois workplace discrimination attorney Palatine drug lawyer Barrington personal injury lawyer Jay Andrew Des Plaines criminal attorney subcontractor suspended license irrevocable trust Buffalo Grove personal injury lawyer Inverness corporate attorney DUI attorney workers comp Kenilworth estate planning attorneys foreclosure Palatine business attorney insurance dispute, insurance dispute lawyers, insurance claim denial, insurance claim delays, Rolling Meadows insurance dispute attorneys insurance claim disability benefits hit and run accident boating DUI Chicago employment lawyer liability claims employees real estate contract Des Plaines motorcycle accident attorney Rolling Meadows estate planning attorney Crystal Lake tax lawyer Des Plaines medical malpractice attorney Palatine probate lawyer Arlington Heights estate planning attorney personal injury accidents real estate attorney Chicago employment attorney jet ski Illinois probate lawyer Inverness elder law lawyer startup company Mount Prospect real estate lawyer pedestrian-automobile accident clemency Thanksgiving license Arlington Heights insurance attorney Policy Cancellation employee rights cell phone accidents medical malpractice, missed diagnosis, delayed diagnosis, medical mistake, Deer Creek medical malpractice lawyers Illinois workers compensation attorney Crystal Lake civil litigation lawyer Rolling Meadows boating crash lawyer unpaid overtime murder hiring employees Chicago lawyer medical malpractice compensation employment law Chicago biking tips CAM car crash injuries wills Crystal Lake business law attorneys vacation home fines Schaumburg car accident attorney health insurance dispute Inverness insurance attorney Crystal Lake traffic attorney Deer Park medical malpractice attorney digital information medical marijuana Rolling Meadows employment attorney Chicago attorney PTSD wrongful death Buffalo Grove personal injury attorney Barrington attorney digital evidence Arlington Heights personal injury lawyer Long Grove wills and trusts attorneys car crash bicycle dooring accidents Illinois medical malpractice lawyers Barrington employment law firm Rolling Meadows personal injury lawyer Schaumburg probate attorney llinois Real Estate Lawyers Association Rolling Meadows employment law attorneys insurance claims Rolling Meadows insurance dispute lawyers privacy laws Chicago corporate attorney Illinois employee rights attorney. employee discrimination Barrington employment law attorney residential real estate Illinois estate planning law firm Illinois insurance disputes FMLA insurance negligence Illinois law Palatine corporate attorney Illinois trucking safety bicycle accidents estate planning for college students Barrington estate planning lawyer Deer Park workers compensation lawyer car accident lawyer Arlington Heights trucking lawyer wrongful termination, employment law, whistleblower protections, Illinois employment laws, discrimination in the workplace slip and fall Buffalo Grove employment lawyer Barrington criminal defense lawyer Rolling Meadows medical malpractice lawyers traffic violations defense traffic offenses Rolling Meadows insurance lawyer Illinois jet ski accident lawyer job lawyers comparative negligence Rolling Meadows marijuana attorney traffic accidents Palatine real estate lawyer real estate closing Arlington Heights personal injury attorney employee misclassification Illinois personal injury lawyers Crystal Lake bike accident lawyer estate tax homestead rights Rolling Meadows traffic law firm Barrington workers compensation attorney Colin H. Gilbert Palatine traffic lawyer insurance denials pregnant women cell phone tower data Inverness DUI lawyer pizza emoji traffic crimes probate denial of life insurance DUI condo association drunk driving statistics wills and trusts Crystal Lake injury attorney dram shop law Mount Prospect elder law attorney auto accidents denied insurance claims personal injury claims Schaumburg wrongful death attorney head on collisions automated cars overtime pay Super Mario Palatine employment attorney underage DUI Palatine Attorney involuntary manslaughter unauthorized overtime Rolling Meadows personal injury lawyers probate claims process Illinois corporate lawyer South Barrington real estate lawyer Schaumburg estate attorney School Visitation Rights Act defective products POA criminal record swimming pools Chicago will attorney murder charges real estate leasing Arlington Heights Traffic Lawyer criminal defense Illinois motorcycle accident lawyer Crystal Lake employment law attorney workplace sexual harassment Palatine punch death Crystal Lake insurance lawyer small business Illinois Human Rights Act traffic laws Illinois injury lawyer cell phone healthcare claims commercial leasing Illinois attorney unfunded trust ObamaCare Chicago car accident lawyer Illinois insurance claim dispute lawyers drugs Des Plaines personal injury lawyers Illinois estate planning Palatine traffic accidents Mt Prospect Attorney pedestrian injuries, pedestrian fatality dynasty trusts Schaumburg criminal law attorney drug crime loopholes landlord life insurance lawyer digital assets Whistleblower Claims pay when paid contract TBI Buffalo Grove insurance claim dispute lawyers no contest clauses Barrington medical malpractice lawyers living trust vs will Buffalo Grove injury lawyer Buffalo Grove traffic attorney Schaumburg drug defense lawyer blended families Des Plaines injury law firm Federal Food Drug and Cosmetic Act motorcycle accident lawyer Crystal Lake personal injury lawyer personal injury law firm Buffalo Grove car accident lawyer caretaker rights Illinois Workers’ Compensation Commission murder defense BAIID insurance disputes, Illinois insurance disputes, Illinois insurance dispute attorneys, denied insurance claims, Arlington Heights insurance dispute attorneys Des Plaines Traffic Lawyer independent contractor Barrington drug crime attorney overtime violations employment law, Illinois employment laws Des Plaines DUI attorney texting and driving tax attorney Transfer on Death Instrument personal injury claim vacation home wage theft car crashes distracted driving accident victims Illinois wrongful termination lawyer gift taxes Rolling Meadows insurance dispute lawyers, insurance dispute business litigation medication errors Kenilworth estate planning attorney federal regulations for LLCs Palatine workers compensation lawyer Illinois construction accident attorney taxes Illinois insurance dispute lawyers hands free device Rolling Meadows DUI lawyer Buffalo Grove law firm appealing an insurance claim whistleblower protections underinsured motorist food poisoning traffic deaths Illinois employment attorneys Illinois tax attorney back injuries Inverness real estate attorney civil litigation Illinois bicycle safety Illinois insurance claims lawyers Illinois small business blood alcohol content pain and suffering Arlington Heights employment attorney Buffalo Grove traffic lawyers Arlington Heights real estate lawyer Illinois employment lawyer creditors Illinois employment law Des Plaines civil attorney Illinois insurance lawyer Illinois speeding lawyer trust payments Barrington estate planning attorney Rolling Meadows tax attorney DUI defense Chicago traffic lawyer Affordable Care Act Rolling Meadows Arlington Heights medical malpractice lawyer caregiver Schaumburg employment attorney BAC paid sick leave compensatory time Arlington Heights car accident lawyer living wills Illinois medical malpractice attorney installment contracts Arlington Heights accident attorney personal injury civil litigation attorney elder abuse real estate lawyer mortgage Crystal Lake car accident lawyer living trust benefits real estate Illinois collections attorney brain injury premises liability nursing home negligence Chicago estate planning lawyer sole proprietorship South Barrington real estate attorney liens Inverness probate lawyer speeding Rolling Meadows Attorney spinal cord injuries Illinois employment law firm Illinois wills and trusts estate attorney power of attorney Illinois employment laws estate planning lawyer Schaumburg insurance lawyers Illinois civil litigation lawyer Illinois business lawyer Rolling Meadows real estate attorney sexual harassment natural gas explosion Barrington Illinois estate planning lawyer traffic tickets owner responsibility Crystal Lake medical malpractice lawyer Rolling Meadows drug defense attorney trusts Illinois driving without license filing a medical malpractice claim Illinois insurance claim attorney Illinois insurance claim dispute lawyer Illinois employment law attorney commercial real estate Palatine insurance lawyer federal crimes Crystal Lake employment attorney product liability life insurance policy condo forming a corporation in Illinois uninsured motorist Palatine corporate law attorneys criminal law attorney fees Arlington Heights wills and trusts attorney unpaid assessment trustee fault based insurance Illinois insurance attorney IRS bike accident Illinois workplace lawyer Illinois workers compensation lawyer Arlington Heights wills and trusts lawyer ken apicella Rolling Meadows business lawyer Inverness estate planning lawyer Deer Park traffic lawyer real estate zoning medical research estate planning, digital assets, Revised Uniform Fiduciary Access to Digital Assets Act, Illinois digital assets, Illinois estate planning, Schaumburg personal injury lawyers Des Plaines Long Grove real estate attorney motorcycle accident Illinois traffic accident lawyer Arlington Heights wills and trusts lawyers Landlord Tenant Ordinance employment contract Illinois traffic attorney Barrington injury attorney Illinois home inspection Des Plaines real estate lawyer Illinois personal injury attorney commercial leases Self-Directed IRA Accounts defective products lawyer trench injuries Schaumburg real estate lawyer Barrington criminal lawyer trucking accidents fiduciary rule insurance disputes traumatic brain injuries Schaumburg personal injury lawyer real estate attorneys Illinois will lawyer Rolling Meadows probate lawyer Illinois traffic attorneys Rolling Meadows car accident lawyers Barrington Traffic Lawyer power of attorney for healthcare estate plan pedestrian accident spinal cord injury probate lawyer Palatine personal injury lawyer Illinois criminal defense attorney Barrington employment attorney Illinois Transfer on Death Instrument insurance denial appeals Crystal Lake employment lawyer Des Plaines collections attorney Schaumburg elder law lawyer probate process consent to a search Riverwoods estate planning lawyer Palatine injury attorney college kids Arlington Heights injury attorney construction accidents, personal injury, wrongful death, Arlington Heights personal injury attorneys, workers' compensation Illinois trusts attorney DMV bad faith insurance claims IRELA new real estate form Schaumburg criminal attorney Crystal Lake accident attorney Joliet general practice lawyers Schaumburg Attorney insurance claim denial Palatine law firm modern family estate planning Barrington personal injury attorney Chicago insurance claim attorneys sexual images Crystal Lake will lawyer home inspection lawyer Illinois registered agent insurance claim denials medical malpractice claims personal injury attorney Illinois Sales Representative Act digital assets, digital fiduciary, estate planning, digital content, Long Grove estate planning lawyers estate planning FSLA expungement insurance claim dispute Barrington boating accident attorney IRA trust transfer pet law probate claims license suspension Rolling Meadows criminal lawyer Crystal Lake pedestrian accident lawyer senior citizens Liquor Control Act LLCs Des Plaines claims law firm in terrorem provision Palatine employment lawyer breathalyzer test Do Not Resuscitate investment property Fourth of July insurance dispute attorney golf accidents Illinois Trust Code Palatine criminal defense lawyer agent Illinois pedestrian accident attorney Arlington Heights TBI attorney corporate law distracted driving accidents BUI insurance agents Arlington Heights traffic attorney life insurance claims living trust Deer Park accident attorney underfunded trust Rolling Meadows criminal attorney social media after death Illinois job attorney insurance attorney Illinois Probate Act of 1975 liability Crystal Lake medical malpractice law firm operating agreements drunk driving Barrington litigation attorney Rolling Meadows accident lawyer Forcible Entry estate planning attorney Arlington Heights car crash attorneys meal breaks jet ski accidents contracts Illinois real estate Illinois Wage Payment and Collection Act car accident preventable medical errors boating under the influence advance healthcare directive rent to own real estate contracts Rolling Meadows traffic attorney privacy Illinois car accident attorney Buffalo Grove corporate attorney Illinois mortgages Arlington Heights pedestrian accidents Palatine estate planning lawyer Des Plaines real estate attorney deadly crashes marijuana Illinois living will Schaumburg estate planning attorney construction contracts trucking accident lawyers manufacturing Family Medical Leave Act Palatine construction attorney Buffalo Grove probate lawyer breach of contract probate fees Chicago estate planning drug crimes Des Plaines personal injury lawyer Palatine civil attorney Inverness accident lawyer Illinois personal injury lawyer low-ball insurance settlement employment lawyer Kenilworth estate planning lawyer Inverness civil lawyer Crystal Lake estate planning lawyer Schaumburg injury lawyer Deer Park personal injury lawyer Crystal Lake medical malpractice attorneys Long Grove estate planning attorneys Illinois DUI attorney Schaumburg personal injury attorney personal injury, auto accident injuries, delayed injuries, serious injuries, Des Plaines personal injury attorneys pet bites capital gains tax GM ignition switches truck collisions loss of consortium

Archive