[WSBAPT] Trust Question re Capital Gains Income

[Rebecca King]

Thank you, Donna. This is really helpful.

Warmest regards,
Rebecca King
Attorney

Northwest Elder Law Group
2150 N. 107th Street, Suite 501
Seattle, WA 98133
Main: (206) 937-6102
Direct Line and Fax: (206) 866-6544
www.nwelg.com

Recognized for Providing Services in Elder Law

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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Donna Calf Robe
Sent: Friday, January 12, 2024 9:26 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Trust Question re Capital Gains Income

Hi Rebecca,
I had to research this issue a few years ago and saved some of the info I found, but now I cant locate the source.  So for what its worth, below is part of what I found:


by default, under the Uniform Principal and Income Act (UPIA)<http://www.leimberg.com/freeresources/truarticles/primeronuniformprincipal.html>, capital gains are treated as principal for fiduciary trust accounting purposes. This can be overridden if the trust document itself stipulates that capital gains will be treated as income (in which case the trust document supersedes the UPIA default provisions), or if the trustee is granted discretion to determine whether capital gains will be treated as income or principal<http://cbmslaw.com/reducing-income-taxes-for-estates-and-trusts/>. And if the trust allows capital gains to be treated as income, Treasury Regulation 1.643(a)-3(b)<https://www.law.cornell.edu/cfr/text/26/1.643(a)-3> allows those capital gains to be eligible for the DNI deduction as well. However, if the trust is silent on these issues, and/or the trustee doesn't have discretion to adjust the treatment, capital gains remained "principal" for trust accounting purposes (and therefore ineligible for the DNI deduction).
Donna

Donna M. Calf Robe
Attorney
Brothers & Henderson, P.S.
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Seattle, WA 98103
Phone: (206) 324-4300 x113
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e-mail:  donnac at brothershenderson.com<mailto:donnac at brothershenderson.com>
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From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Rebecca King
Sent: Friday, January 12, 2024 9:03 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: [WSBAPT] Trust Question re Capital Gains Income

Hi everyone,

Trust language says, "After the death of the Grantor and Grantor's spouse, the Trustee shall distribute the net income of the Family Trust equally to the surviving children of the Grantor."  The principal continues to be held in Trust.  If assets are sold which have capital gains, does that capital gains income need to be paid out to the Grantor's children?  There is no definition of "income" in the Trust.  I cannot find any case law on point, which is surprising because I would think this issue would come up all the time for Credit Shelter/QTIP trusts.

Thank you!

Rebecca King
Attorney

Northwest Elder Law Group
2150 N. 107th Street, Suite 501
Seattle, WA 98133
Main: (206) 937-6102
Direct Line and Fax: (206) 866-6544
www.nwelg.com<http://www.nwelg.com>

Recognized for Providing Services in Elder Law

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CONFIDENTIALITY NOTICE: This e-mail message, including any attachments, is for the sole use of the intended recipient(s) and may contain confidential and privileged information protected by law. Any unauthorized review, use, disclosure or distribution is prohibited. If you are not the intended recipient, please contact the sender by reply e-mail and destroy all copies of the original message.



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