I have two questions: what is the purpose of
the W-9 and on the BDQ it asks for a tax
bracket. How do I determine that or can it be
Here's the deal. The trust is likely a complex trust (as opposed to a simple trust). As used in the tax world, complex and simple trusts have a distinct meaning. A simple trust is a trust that is required by its terms to pay out all of its income every year to the trust beneficiaries. A complex trust is any trust that is not a simple trust.
Trusts are taxed on their income except to the extent that they make distributions from the trust to the trust beneficiaries during the year, in which case the income passes to the beneficiaries and those beneficiaries then include the trust income on their returns and pay tax on it. So, for example, if the trust has $100 of tax income for the year and distributes during the year at least $100 to the beneficiaries, all the $100 of trust income will end up on the beneficiaries' returns. But if the trust only distributed $50 to beneficiaries, only $50 passes out to the trust beneficiaries and the trust is taxed on the remaining $50. The trust return (Form 1041) includes Schedules K-1 that show what share of the trust income goes to each beneficiary. The beneficiary gets a copy from the trust of his/her K-1. That K-1 then helps you to know what amount goes on your return and where. The trust needs the W-9 information from you because that information is necessary for the K-1.
The tax bracket is easy to determine, assuming that your income is expected to be about the same this year as it was last year. First, though, let me explain why it matters. The trust basically wants to know your marginal tax rate, i.e. what your next dollar of income would be taxed at if you received that dollar at the end of the year. That's effectively what the trust income will be taxed at if the trust distributes income to you during the year. The reason this matters is that while trusts are taxed on their incomes at the same rates as individuals, the rate structure for the trust is much more progressive; i.e. it hits the maximum tax rate at a much lower income level than individuals typically do. So, often it is better for everyone if the trust at least distributes enough in assets to the beneficiaries to force the trust income up to the beneficiaries. That is not always the case, though, depending on the rate that the beneficiary is taxed. In other words, knowing your tax rate will help the trustee determine if the tax smart thing to do is distribute some assets to you or keep everything in the trust and have the trust pay the tax.
Ok, assuming you are married and filed a joint Form 1040 (the "long form") return for 2009, here's what you do to determine your marginal tax rate. Look at line 43 of your return—the taxable income line. If the amount on that line is:
less than $16,700 — 10%
at least $16,700 but less than $67,900 — 15%
at least $67,900 but less than $137,050 — 25%
at least $137,050 but less than $208,850 — 28%
at least $208,850 but less than $372,950 — 33%
$37,950 or more — 35%