What Penalty is There for a Late Trust Distribution?
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Question:
We just learned that we were supposed to divide and distribute the trust property upon the death of our father. Unfortunately, we did not do that and he died in April 2016. Is there a penalty that will be incurred and what steps can be taken to do this now?
Response:
I assume you’re talking about a revocable trust that ended upon your father’s death. There’s really no penalty for the delay except that the beneficiaries might be unhappy about having to wait for their distributions. In addition, you may have some more work to do. You don’t say what assets are held in the trust, but if they have been producing income, then you should have obtained a tax identification number for the trust and should file a 1041 trust tax return for each year beginning in 2016. An accountant can help you with this. Otherwise, you simply distribute the property as you would have in 2016. You may want to keep a small reserve to cover any expenses that may arise after the distribution, such as paying the accountant for all the tax returns.
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