Visitor III

1041 Trust return and Withdrawals

 This is a basic question about trusts and withdrawals.

 

My children (17 and 20 years old) each have complex trusts. Last year we took funds out of their trusts to pay for education (per the terms of the trust document). The payments went directly to the respective schools. I am not sure how to proceed on the 1041. Since they are beneficiaries, do I proceed as such even though the check did not go to them, but rather to the school? If I have to declare these withdrawals as beneficiary withdrawals, I assume they will generate a K1 for each child (please correct if not true). Do I then have to report the K1 on their individual returns, and will that be taxable? 

1 Comment
TurboTax Specialist

1041 Trust return and Withdrawals

The trust will issue a K-1 to each beneficiary to report the taxable portion of the distribution.  Your children will report the K-1 on their individual tax returns.  The distribution is considered taxable income.  However, the amount and type of income received will determine if taxes are due.

 

Any education expenses paid, which are reported on Form 1098-T, Tuition Statement, can be used to claim education deductions or credits.