If I have an irrevocable trust, who is responsible for paying income taxes on the income generated by the trust?

Dec 12

If you have an irrevocable trust and it is generating income such as interests, dividends, rent, etc. then determining who will be responsible for paying income taxes depends on whether it is a grantor trust or a non grantor trust.

If it is a grantor trust, then the grantor (or the creator) of that trust would generally be responsible for reporting that income on his or her 1040 (their individual income tax return).

If it a non-grantor trust, then the income generated in the irrevocable trust would either be taxed at the trust level (which you generally don’t want) or it would be taxed to whichever beneficiary received the income from the trust. In a situation where income is distributed from an irrevocable trust to a beneficiary, there would need to be a k-1, which would be filed with the beneficiary’s individual income tax return.

If you are unsure whether you have an irrevocable grantor trust or non-grantor trust, then just give me a call and I can review your trust for you.

Joseph Lento Perennial Estate Planning Youtube Channel Manchester, NH Stoneham, MA

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