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


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