Reporting income from in-trust accounts

Q – Four years ago, I set up two in-trust accounts, one for my niece and the other for my nephew. I recently sold some of the investments for a capital gain and temporarily invested the proceeds in interest bearing investments. Is the interest now being generated in the accounts attributable to me, that is, do I have to report any interest income the investments are now generating on my income tax forms or are my niece and nephew supposed to report them? – M.T., Montreal

A – You should discuss the tax implications with the lawyer that drew up the terms of the trust. Generally, assuming the trust is irrevocable, you’re on the hook for the interest income. However, your niece and nephew should file tax returns and claim the capital gains. Since they probably have no other income, there will be no tax to pay. – G.P.