A trust fund is a separate legal entity that holds and distributes assets to a person or group. A trust is created by a grantor who deposits assets into the account. The trust assets are managed and invested by the trustee. The person who receives trust distributions is the beneficiary. As a financial entity, a trust needs to keep track of its investment income and distributions on its financial statements. The trustee must keep accurate records as taxes are due each year on trust income over $600, and the beneficiaries must be aware of their trust's status at all times.
Review the initial trust paperwork that was prepared to establish the trust. This will indicate the required distributions of the trust.
Record the annual investment performance of each investment in the trust. This information can be found on the investment statements for the trust's investments. Change the account balances of the investments on the financial statements.
Pay out the required annual distribution from the trust assets to the beneficiaries. Record the distribution as a reduction in trust assets on the financial statements.
Subtract the annual trust distribution from the total investment gain for the year. If the trust has retained over $600 in income after distributions, the trust will need to pay income tax on the excess.
Deduct any income tax paid for the year from trust assets on the financial statements.
File the completed annual financial statement trust so that it can be reviewed next year for distributions and taxes.
