Trust Charitable Contributions

[Randall]

If the trust document list some beneficiaries that are organizations and would be charitable, are these distributions considered charitable deductions in calculation of the income tax of the trust.  Other beneficiaries listed are individuals and the trust wants to pay the tax upfront.  Yes I know the tax will be higher at the trust level.

[Sara EA]

As long as the distributions to charities come from income and are specified in the trust document, they are deductible.  I cannot imagine why the trustee would want to pay the taxes for the beneficiaries, who may end up receiving a lot less than if they paid the taxes at their own rates.  The only way to do it would be to make no distributions, pay the income tax, and then pay the beneficiaries the next year.  Does the trustee understand his or her fiduciary duties?

[DANRVAN]

2 hours ago, Sara EA said:

Does the trustee understand his or her fiduciary duties?

And the 65 day rule which gives him or her several more weeks to make a deemed distribution for 2024?

[Randall]

The organizations are listed as beneficiaries with their percentage due.  All assets (principal and income) are to be distributed ending the trust.  So I assume I can at least allocate the income and principal and take some of it as a charitable deduction.

[BulldogTom]

4 hours ago, Randall said:

The organizations are listed as beneficiaries with their percentage due.  All assets (principal and income) are to be distributed ending the trust.  So I assume I can at least allocate the income and principal and take some of it as a charitable deduction.

Be careful.   The trustee needs to direct you on what to call a charitable contribution.   These charities can sometimes have lawyers that go after pros who don't give them what they are supposed to get in the trust document.   I heard Stanford is particularly aggressive.

Tom
Longview, TX

[Randall]

12 hours ago, BulldogTom said:

Be careful.   The trustee needs to direct you on what to call a charitable contribution.   These charities can sometimes have lawyers that go after pros who don't give them what they are supposed to get in the trust document.   I heard Stanford is particularly aggressive.

Tom
Longview, TX

Thanks.  I think the document specifies how much each will get but it is a percentage and not a dollar amount.  I still need to get with the trustee (and attorney) on how much the final amount will be.  Of course, the trust paying the tax upfront may affect the final amount these charities receive. I'll have to review this with the trustee.  The document says the trustee has authority but does not direct the trustee to yay or nay.  I don't think the amount will be large enough for these charities to have their lawyers involved.  We're talking maybe $15k or so each, not millions.

[Randall]

Another question.  I think I can at least allocate the amounts between principal and income.  So at least a portion should  be allowed as a charitable deduction.  My question is can the trustee allocate all of the income portion going to the charities and take a bigger charitable deduction and allocate the principal going to the individuals?  I'll  have to look back at the document but I was just wondering.  After all, in the end, the recipients still get the same amount of money, whether from the principal or income.  The income is now part of the principal.