Legal Question in Wills and Trusts in Florida
tax implications of redeeming treasury bonds
My 98 y old father is very ill and will
die soon.He established a revocable
trust and I am a cotrustee,an
executor and a beneficiary.
One of the assets in the name of the
trust are EE series Treasury bonds
the face value of which is $60000.
Each of the bonds accumulated an
interest approximately $500 per
bond.
My father's income has been very
small and my income is substantially
larger. Furthermore he resides in the
State of Florida where there is no
state tax and I reside in New York.
As far as tax implications are
concerned is it more
advantagous, considering the fact
that he is in a lower tax bracket than
I, that the Trust which is linked to his
SS #, redeems the bonds prior to my
father's death and thus will have to
pay to the IRS income tax on the
interest obtained from the
redemption of the bonds?.I suppose
that if I redeem the bonds which I
will inherit upon his death the
interest will be considered to be my
income and therefore may be taxed
at a higher rate since I am in a
higher tax bracket.Am I right making
this assumption?
Also,am I correct in assuming that if
he redeems the bonds in Florida
there will be no state tax
consequences ?
2 Answers from Attorneys
Re: tax implications of redeeming treasury bonds
Based on the information you provided, you are on the right track. You need to contact a CPA to verify the benefits of your proposed course of action.
Re: tax implications of redeeming treasury bonds
You ask some very good questions and in all truthfulness need to sit down with a Trusts and Estates attorney to completely address the issue. A review of the Trust documents will be the first order of business.
There are many points to be discussed with regard to your post. The Trust owns the bonds and if they are cashed in any tax burden will obviously be on the Trust, but the amount of that burden is not really identifiable based on the information you give.
One thing to consider is what happens to the trust upon your father's death? How is it to be distributed, who are the remainder beneficiaries, what is the value of the assets, what if any safeguards have been put in place to offset any estate taxes, where was the Trust established. (just to name a few)
The situation you describe is quite complicated and can not be adequately addressed in this forum. You should contact a Trust and Estates attorney as soon as possible.
You did not indicate what county your father is in, but I will be more than happy to speak with you and determine whether I or one of my colleagues can assist you.
I currently act as Trustee for large personal and family trusts and have dealt with many of the issues you describe. Please feel free to contact me, to discuss your situation. Initial consultation is free and I offer reasonable hourly rates.
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