How to Calculate the Beneficiary's Share of Qualified Dividends

by Victoria Duff

Qualified dividends are those paid by a company that is on the Internal Revenue Service's list of qualified companies. A trust holding stock that pays qualified dividends must distribute the income from those dividends according to the stipulations in the trust indenture. If the income is to be distributed, it must be allocated according to the stipulations in the trust indenture regarding the percentage ownership of the trust by the individual beneficiaries.

Review the trust indenture to determine the percentage ownership of each beneficiary. Note whether there is a difference in ownership with relation to certain holdings in the trust, or instructions regarding the payout of dividend income. Also note whether income is to be paid as received, monthly, quarterly or annually.

List the total dividend income received in the trust for the period in question. If there are stipulations regarding dividends received from certain holdings, list the total dividend income received from each holding.

Multiply the dividend income by the percentage ownership of each beneficiary to that income to arrive at the amount of income to be distributed to that beneficiary.

Tip

  • If you have questions, contact a CPA or tax attorney who specializes in trust administration. Administering a trust is sometimes complex and is a task that should not be taken lightly. Many lawsuits stem from differences of opinion regarding the administration of trusts, so it is best to have a professional assist you in your duties as trust administrator.

Warning

  • If you are administering a trust, it is to your advantage to keep detailed records of all your activities, particularly pertaining to the distribution of income. Supply each beneficiary with copies of your worksheets detailing total trust income and how it was allocated, with any explanations necessary to make the process you used as clear as possible.

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