I am one of the beneficiaries of an irrevocable trust set up by my elderly mother. What happens with taxes after her passing? —John Tufano, Indianapolis

The tax treatment of the trust after your mother passes away depends on several factors -- notably the trust's specific terms, shifting laws, and the assets in the trust.

If your mother controlled and drew money from the trust, it will be counted as part of her estate. That means it will incur estate taxes if your mother's total assets exceed a certain amount when she dies. Also, for future capital gains calculations, the acquisition cost of the trust's assets will be boosted to their value at the time of your mom's death. The upshot: Eventual income taxes could be lower than if the trust weren't in the estate, says Steve Hartnett of the American Academy of Estate Planning Attorneys.

Very few estates trigger estate taxes, but the income tax will be harder to avoid. The trust will have to pay on earnings and capital gains on the assets it retains; on distributions you receive, you'll owe the taxes instead.

—- Amanda Gengler

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