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


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