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


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