FREE TOOL · TRUST ADMINISTRATION

65-Day Election Worksheet

§663(b) permits a trust to treat distributions made within 65 days after year-end as having been made in the prior year — shifting income from compressed trust brackets to beneficiary brackets. From Chapter 19 of the Trust Administration Guide.

Inputs (prior tax year)

Trust's DNI for prior year Distributions actually made during prior year Distribution made in 65-day window (Jan 1 - Mar 5) Beneficiary's marginal federal rate (decimal, e.g. 0.24)

Election analysis

Undistributed DNI (DNI - prior-year distributions) Maximum permitted 65-day election (lesser of window dist or undist DNI) Tax at trust top bracket (37% + 3.8% NIIT) Tax at beneficiary bracket

Federal tax savings from 65-day election

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Savings equals (trust marginal rate − beneficiary marginal rate) × elected amount. The election must be made on Schedule B line 6 of the Form 1041 for the prior year.

Mechanics & checklist

1. Estimate prior-year DNI by mid-January from preliminary Form 1041 numbers
2. Compare to actual distributions made in prior calendar year
3. Compute undistributed DNI
4. Evaluate beneficiary brackets vs the trust's 37% (above ~$15,200) plus 3.8% NIIT
5. Determine distribution to make under 65-day rule (by March 5 of year+1)
6. Execute distribution (cash or in-kind, document date and amount)
7. Elect on Form 1041 Schedule B line 6 (election is irrevocable)
8. Report on Schedule K-1 to each beneficiary (character preserved)

Why this matters

The trust's top federal bracket of 37% (plus 3.8% NIIT = 40.8%) begins at approximately $15,200 of taxable income for 2026. A single individual reaches the same 37% bracket at $626,000+. The trust-to-individual ratio is approximately 40:1.

The 65-day election is the trustee's mechanism to capture this differential after year-end. A $50,000 distribution to a 24%-bracket beneficiary instead of retention at the 40.8% trust rate saves $8,400 of federal tax — every year.

Source: Trust Administration Guide Chapter 19; sample election language in Appendix C.5.