Does Descendants trust have to file separate return?

My wife's parents set up a Descendants Trust for our children. My wife is the named Trustee. The end-of-year tax statement has 1099-DIV line 1 and 1099-INT line 1 amounts. Can I add these to our joint tax return, or does this trust have to file its own return?

Yes. The trust MUST file its own return form 1041 with K-1s to any beneficiary getting a distribution. IF the income was distributed on a K-1 you must consider adding that income to yours (see form 8614), or filing form 8815 for a Child's Tax Return. You may have left (some of, or all) the income in the trust, but still want to distribute it tax-wise because your tax bracket is lower than the trust's tax bracket. Or, you may want to leave the income in the trust and let the trust pay its own taxes because it is a small amount and taxed less in the trust than if distributed and aded to your income.

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