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For Federal income tax purposes in the United States, there are several kinds of trusts: grantor trusts whose tax consequences flow directly to the settlor's Form 1040 (U.S. Individual Income Tax Return) and state return, simple trusts in which all the income created must be distributed to one or more beneficiaries and is therefore taxed to the ...
However, a revocable trust can provide language to create sub-trusts upon the death of a grantor (e.g. credit shelter or other irrevocable trusts) that can preserve or reduce future estate tax ...
A revocable trust also allows you the freedom to change your mind about the trustees and beneficiaries. If family relationships, friendships, or business relationships change over time, you might ...
Simple and complex trusts, however, have to directly pay taxes on all income, assets and tax events. Trusts pay federal, state and (when applicable) local taxes. However, this article will only ...
The trust's income can, however, be taxed in the hands of either the trust or the beneficiary. A trust pays CGT at the rate of 20% (individuals pay 10%). Trusts do not pay deceased estate tax (although trusts may be required to pay back outstanding loans to a deceased estate, in which the loan amounts are taxable with deceased estate tax). [54]
Tax planning usually plays a considerable role relative to the use of trusts. [ 2 ] Historically, whilst the courts have been fairly amenable to the use of trusts in tax planning, [ 3 ] as tax planning schemes have become more aggressive, so the courts have increasingly taken a restrictive view of their tax treatment.
Estate planning is a crucial part of any holistic financial plan. As a financial advisor, you could direct your clients to an estate planning attorney for guidance in this area, but while ...
Trusts which are set up to protect vulnerable beneficiaries, such as blind trusts or spendthrift trusts will have specific provisions relating to the nature of the beneficiaries. However, in general, most trust instruments will have provisions which address the following aspects of the administration of the trust:
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