Estate and Trust Planning Opportunity – The 65 Day Rule

Dickinson Wright

It is not is too late to plan for 2018. Under Section 663(b) of the Code, the “65 Day Rule” provides an opportunity for estates and certain trusts to elect to treat distributions made within 65 days of year-end as if made on the last day of the prior tax year and thus to carry-out income from the estate / trust and to have the income taxed directly to beneficiaries. For 2018, the highest tax rate will apply to trusts / estates with income in excess of $12,500, while for a single individual the highest tax rate will not apply until income exceeds $500,000. In addition, income level requirements are also different for triggering the 3.8% net investment income tax (i.e. at $12,500 for estates / trusts and $200,000 for a single individual). Given these large differences, the 65 Day Rule is a useful tax planning tool that fiduciaries should keep in mind.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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