The 65-day rule for trusts refers to a tax provision in the U.S. that allows certain trusts (typically complex trusts and estates) to make distributions to beneficiaries within 65 days after the end of the tax year (which is usually March 6 for calendar-year trusts) and still treat them as if they were made in the prior tax year.
For the 2024 tax year, this means:
If a trust distributes income to beneficiaries by March 6, 2025, it can elect to deduct those distributions from its 2024 taxable income, rather than 2025.
Why Use the 65-Day Rule?
Reduce Trust Taxes – Trusts often have higher tax rates than individual beneficiaries. Shifting income to beneficiaries (who may be in a lower tax bracket) can result in tax savings.
Deferral & Flexibility – Trustees can review the trust’s tax situation in early 2025 and make strategic distributions to optimize taxes for 2024.
Important Notes:
The trust must make an election on Form 1041 (the U.S. Income Tax Return for Estates and Trusts) to apply this rule.
The election is irrevocable once made.
The rule only applies to income distributions, not principal distributions.