{"id":1881,"date":"2020-12-01T22:57:10","date_gmt":"2020-12-01T22:57:10","guid":{"rendered":"https:\/\/www.jacksonwhitelaw.com\/arizona-estate-planning\/?p=1881"},"modified":"2024-11-19T21:49:07","modified_gmt":"2024-11-19T21:49:07","slug":"trust-file-tax-return-arizona","status":"publish","type":"post","link":"https:\/\/www.jacksonwhitelaw.com\/arizona-estate-planning\/blog\/trust-file-tax-return-arizona\/","title":{"rendered":"Does a Living Trust Have to File a Tax Return in Arizona?"},"content":{"rendered":"<h2>Introduction<\/h2>\n<p>It\u2019s natural for people to want to protect their loved ones after they\u2019re gone. A way of safeguarding the future, trusts allow individuals to distribute assets to loved ones based on their wishes. As a bonus, setting up a trust can help limit the tax burden your family endures when you\u2019re no longer around while enabling them to avoid a lengthy probate process. Keep reading to learn more about trusts and discover whether Arizona law requires your trust to file a tax return.<\/p>\n<h2>Understanding Trusts<\/h2>\n<p>Most people have heard of a trust, but that doesn\u2019t mean they know exactly what the term means. Legal arrangements, trusts allow property owners to pass money and property on to their beneficiaries via a person called a trustee. It\u2019s up to the creator of the trust to determine who will serve as trustee and how and when assets will be distributed to family and friends. Along with helping beneficiaries access assets faster by avoiding the probate process, setting up a trust can save your children and grandchildren from paying costly estate taxes.<\/p>\n<h2>Tax Laws for Trusts<\/h2>\n<p>If you\u2019re thinking of setting up a trust, it\u2019s important to note that they are subject to different rules of taxation than other types of investment accounts. When you put assets into a trust, be aware that your beneficiaries will be required to pay taxes on distributions from income.<\/p>\n<p>Unlike income distributions, distributions from the trust principal are not taxed. Because these funds were already taxed before being placed in the trust, the IRS doesn\u2019t require beneficiaries to pay taxes on them again. Note that the trust will have to pay interest taxes on income that is not distributed by end of year.<\/p>\n<h2>Important Tax Forms for Trusts<\/h2>\n<p>Trustees and trust beneficiaries tend to file two different types of tax forms. Upon receiving income distributions, beneficiaries will be issued a tax form called a K-1. The K-1 reveals how much of a distribution is interest income and how much is principal income. In other words, the K-1 helps beneficiaries determine tax liability stemming from their trust distributions.<\/p>\n<p>Additionally, the trust must file a Form 1041, which reports income, capital gains, deductions, and losses. With this document, the trust can deduct interest it distributes to beneficiaries from its overall taxable income. Fees paid to executors and administrative costs incurred in the settling of the estate are also deductible. It\u2019s worth noting that trustees are responsible for filing Form 1041 on any domestic trust that has taxable income in a given year.<\/p>\n<p><strong>See Also:<\/strong> <a href=\"https:\/\/www.jacksonwhitelaw.com\/arizona-estate-planning\/blog\/legal-fees-estate-planning-tax-deductible\/\">Are Estate Planning Fees Tax Deductible In Arizona?<\/a><\/p>\n<h2>Contact JacksonWhite Law to Protect Your Estate<\/h2>\n<p>If you want to protect your property and assets, <a href=\"https:\/\/www.jacksonwhitelaw.com\/arizona-estate-planning\/services\/trusts\/\">creating a trust<\/a> is a great call. At JacksonWhite, our estate planning attorneys have years of experience creating valid trusts that hold up in court. Our goal is to ensure that you can easily pass on everything you worked so hard to obtain while saving your beneficiaries money and aggravation. Ready to preserve your family\u2019s future? Contact us today!<\/p>\n<p style=\"text-align: left\">Call our Arizona Estate Planning team at <a href=\"tel:4804674325\">(480)467-4325<\/a> to discuss your case today.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Introduction It\u2019s natural for people to want to protect their loved ones after they\u2019re gone. A way of safeguarding the future, trusts allow individuals to distribute assets to loved ones based on their wishes. As a bonus, setting up a trust can help limit the tax burden your family endures when you\u2019re no longer around [&hellip;]<\/p>\n","protected":false},"author":104,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"om_disable_all_campaigns":false,"site-sidebar-layout":"default","site-content-layout":"default","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"default","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"set","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[81],"tags":[],"class_list":["post-1881","post","type-post","status-publish","format-standard","hentry","category-trusts"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.9 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Does a Living Trust Have to File a Tax Return in Arizona?<\/title>\n<meta name=\"description\" content=\"Learn if you need to file a tax return for your trust in Arizona. 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