Medical Expenses paid by an Irrevocable Trust

glenn94123 · ‎05-27-2023

Grantor passed. His assets passed into an irrevocable trust (IT). Sole beneficiary is his spouse. Spouse has parkinsons and memory issues and lives in a memory center. IT pays the $10k monthly fees. For our discussion, let's say the memory center says 100% of the fees are medical expenses.

Can the IT deduct the fees on the 1041? If yes, are these subject to any limitations?

Thanks.

BobKamman · ‎05-27-2023

Looks to me like the trust deducts the medical expenses as a distribution to beneficiary, and she deducts them on her 1040. Depends on the wording of the trust, though.

glenn94123 · ‎05-27-2023

You may be right. Medical expenses aren't really an expense of the trust. To qualify for deductions, the expense has to be incurred because of the existence of the trust. If the expense was necessary outside of the trust, the trust couldn't take a deduction. In this case, it's an expense outside of the trust, so no tax deduction. but i like the idea of passing it through as a Schedule A deduction (subject to 7.5% threshold).