While trusts have many advantages, taxes on any generated income are substantial. As assets are sold each year to fund award distributions, capital gains are incurred and both federal and state (Massachusetts) taxes must be paid.
These taxes could be paid by the trust, or they could be paid by each individual receiving awards during that year. After discussions with Uncle Al’s accountant, it was decided that the trust would pay the taxes directly, rather than burden the students with this task.
After the first year of operation, we had Uncle Al’s accountant file the taxes. Once the process was understood, and because of our decision to pay all the taxes on capital gains, it was decided that we could file the taxes without use of an outside accountant. Since that time, Stephen Molis, one of our Trustees, have prepared and filed the taxes.
As stated above, the taxes paid over the years are substantial. Since 2003, the Trust has had about $634,000 in taxable income, and has paid about $155,400 in taxes, or about 21.4 %.
A complete summary of the taxes paid over the years can be found in the following link Trust Tax History