With her near-sightedness, and those tremulous fingers of hers, at once inflexible and delicate, she could not be a seamstress; although her sampler, of fifty years gone by, exhibited some of the most recondite specimens of ornamental needlework.
State taxes on family trusts vary, but federal laws require family trusts to pay taxes on income it keeps but not on any that is distributed. A trust that earns $50,000 and distributes it all to trust beneficiaries pays no income tax. The beneficiaries pay income taxes on funds given to them.
An exemption trust is created when one person dies and their living trust splits assets based on the estate tax exemption amount. While it is required to file a tax return for an irrevocable trust entity, the income and corresponding tax from this type of trust is passed through to the beneficiary. A K-1 income tax reporting form is generated by the original trust, sent to the IRS by the trust, and given to the beneficiary for filing with their taxes.