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


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