Yeah that sounds deliberate. 

This is a head-in-the sand moment for DH. Leaving it up to me “because I deal with our finances and our own estate attorney.” Honestly, it would be one more fight so I understand.

I’m considering asking DH to refuse his distributions in future years. The money is nice, but we don’t rely on it for groceries.

And you are right—we have no way of knowing that SD is doing her fiduciary duty for the trust. No accounting, no reporting. A check and an IRS form shows up once a year.

Rags wrote:

Engage a CPA or trust attorney and start tightening the walls of SD's trustee coffin around her.  I am not a CPA but I sleep with one every night.  I would surmise that the check is not income to DH in 2025 as he did not receive the trust distribution until 2026.  However, as I understand it, a trustee can elect for trust payments made within the first 65 days of the year as prior year income distribution.  Since DH did not get the check until April 1 that is outside of the 65 day rule.  The check would have had to be issued by March 7 to comply with the 65 day IRS rule.

Trusts are overseen by Probate Courts so file a complaint with the court that oversaw DH's sister's trust and have them climb SD's backside for her failure to comply with trustee regulation requirements.  Get the check and the canceled post mark envelope to a Judge and make SD's life a living hell.  

Here is a summary of what SD could face for her bull-.  Bring the pain. I would.

Failing to distribute payments by the 65-day rule (IRC Sec. 663(b))—typically by March 5th—prevents a trustee from electing to treat a current-year distribution as having been made in the prior year. This results in higher trust-level income taxes, potential beneficiary income tax penalties, and potential surcharge liability for the trustee due to fiduciary duty breaches. 

• Higher Tax Bracket: The trust, rather than the beneficiary, will pay taxes on the income, often at higher "kiddie tax" or top tax rates.
• Missed Tax Savings: The trust misses the opportunity to reduce its taxable income by the amount of the distribution.
• Interest and Penalties: Late filing or payment resulting from this mistake can trigger IRS penalties and interest for underpayment.
• Medicare Premium Impact: The delay can adversely impact a beneficiary's Medicare Part B and D 

Legal and Fiduciary Consequences

• Breach of Fiduciary Duty: The trustee may be accused of failing to manage trust tax obligations diligently, constituting a breach of duty.
• Surcharge Liability: Beneficiaries can petition the court to surcharge the trustee, forcing them to pay the extra taxes and interest out of their own pocket due to financial loss.
• Removal of Trustee: Continued failure or negligence can lead to the removal of the trustee by a c

To avoid these consequences, trustees must ensure distributions meant for tax optimization are completed and election forms (1041-T) are filed within the 65-day deadline.

SD declared the distribution as 2025 income after cutting the check almost a month later than required, then delayed posting it until April 13.  She was trying to screw her father. Time to end her and invoke the action likely to return the most severe consequences for her.  You have clear evidence of her violation of her fiducuary duty to the trust recipients.  The check/date and the canceled post date on the envelope.

Rags, you’re not wrong. I was aware of some of that but not all, and I was smart enough to keep a copy of the check and the original postmarked envelope.

I don’t think that either DH or I have the energy or the will to “bring the pain.”  I do have enough energy for a tip to the IRS though after I gather more information.

I’ll see what our trust attorney recommends. We’re in the process of setting up our own trust (with a professional Trustee and an oversight committee thanks to lessons learned), so I’m burning money anyway.

Ugh. I'm sorry. Yeah...that's purposeful. Glad you will get your own attorney doing your trust to check the one your SD is managing. It's very easy to get that to the IRS. LOL