{"id":4121,"date":"2025-02-05T21:04:40","date_gmt":"2025-02-05T21:04:40","guid":{"rendered":"https:\/\/www.ua-cpas.com\/blog\/?p=4121"},"modified":"2025-02-05T21:04:40","modified_gmt":"2025-02-05T21:04:40","slug":"march-4-2025-deadline-to-reduce-2024-estate-trust-income-taxes","status":"publish","type":"post","link":"https:\/\/www.ua-cpas.com\/blog\/index.php\/2025\/02\/05\/march-4-2025-deadline-to-reduce-2024-estate-trust-income-taxes\/","title":{"rendered":"March 4, 2025 Deadline to Reduce 2024 Estate & Trust Income Taxes"},"content":{"rendered":"

 <\/p>\n

If you are the executor of an estate or the \"\"trustee of a trust,\u00a0you should know that egregiously\u00a0high income tax rates\u00a0apply to estates and trusts at very low levels of income.\u00a0 In 2024, for estates and trusts, a 37% income tax rate as well as the 3.8% Net Investment Income (NII) tax kicks in at $15,200 of income. That\u2019s not very high.\u00a0\u00a0 For example, let\u2019s say an estate has income of $215,200. The tax on the $200,000 (income in excess of the $15,200 threshold), at 40% equals a tax of $80,000. Ouch!<\/p>\n

Suggestions?<\/strong><\/span><\/p>\n

There is hope!\u00a0 Estates and trusts only pay tax on what\u2019s not distributed. Distributions lower the income tax for the trust and at the same time increase the recipient\u2019s personal income tax. However, individuals do not pay the highest rates unless they are wealthy. In our example, if there are four beneficiaries and each receives $50,000 (one-fourth of the $200,000) many individuals will only pay 10% – 24% on that $50,000 instead of 40%.\u00a0 Potential tax saving could range from $32,000 to $60,000 depending on the individual tax bracket of each beneficiary.<\/p>\n

What Can I Do Now?<\/strong><\/span><\/p>\n

It\u2019s not too late. There\u2019s a rule allowing distributions made in the first 65 days of the next year to be treated as if made in the preceding year. A special election must be made on the Fiduciary Income Tax Return. \u00a0This year\u2019s deadline is \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0March 4, 2025.\u00a0 <\/strong><\/span><\/p>\n

 <\/p>\n

Estates don\u2019t need to have a calendar year end.\u00a0 For example, if a decedent died in June, the year end for the Estate can be May 31, in which case the 65-day rule would allow distributions until August 4th<\/sup>.\u00a0 \u00a0\u00a0Executors should keep this in mind when planning distributions.\u00a0\u00a0<\/strong><\/p>\n

Are there Other Factors to Consider?\u00a0<\/strong><\/span><\/p>\n

Yes.\u00a0 In addition to financial considerations, there are other factors to keep in mind.\u00a0 If a beneficiary is not financially knowledgeable and cannot manage money, or has a drug habit or is mentally unstable, you may not want to distribute the funds. These factors may outweigh the potential tax savings of larger distributions from a Trust or Estate.<\/p>\n

Please contact us for assistance with making distributions or any other tax related questions about managing a trust or estate.<\/p>\n","protected":false},"excerpt":{"rendered":"

  If you are the executor of an estate or the trustee of a trust,\u00a0you should know that egregiously\u00a0high income tax rates\u00a0apply to estates and trusts at very low levels of income.\u00a0 In 2024, for estates and trusts, a 37% income tax rate as well as the 3.8% Net Investment Income (NII) tax kicks in […]<\/p>\n","protected":false},"author":3,"featured_media":4128,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6,11],"tags":[78],"class_list":{"0":"post-4121","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-estate-trusts-guardianships","8":"category-income-taxes","9":"tag-estate-income-taxes","10":"entry"},"_links":{"self":[{"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/4121","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/comments?post=4121"}],"version-history":[{"count":6,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/4121\/revisions"}],"predecessor-version":[{"id":4129,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/posts\/4121\/revisions\/4129"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/media\/4128"}],"wp:attachment":[{"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/media?parent=4121"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/categories?post=4121"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ua-cpas.com\/blog\/index.php\/wp-json\/wp\/v2\/tags?post=4121"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}