This is the second in a three-part series on the taxation of trusts. The first part reviewed how a trust can be “substantially owned” by someone, i.e., what is commonly known among Estate Planning or Trusts & Estates attorneys as a “grantor trust.” It also looked at the advantages of using a grantor trust. Here is a link to the first article in the series. This second article in the series examines the Taxpayer Identification Number (“TIN”) which trusts, including grantor trusts, should use. … [Read more...] about Tax Reporting with Trusts
This is the first in a three-part series on the taxation of trusts. The first part reviews how a trust can be “substantially owned” by someone, i.e., what is commonly known among Estate Planning or Trusts & Estates attorneys as a “grantor trust.” It will also look at the advantages of using a grantor trust. The second article in the series will examine the taxpayer identification number which trusts, including grantor trusts, should use. The third article in the series will look at the … [Read more...] about Advantages of Using a “Grantor Trust” in Planning
Trusts can be very useful vehicles to control assets during life and after death. During life, they can be especially helpful to control assets during periods of disability. After death, a trust can provide asset protection, remarriage protection, asset management, and many other benefits which might not be available otherwise. Generally, trusts are income taxed in two different ways, as “grantor” trusts or “nongrantor” trusts. A grantor trust is one that is taxed to the grantor (or other … [Read more...] about How Are Trusts Taxed?
Estate Planning attorneys often have misperceptions about “grantor trusts.” Certainly, clients understand them even less. Grantor trusts are an income tax concept, not an estate tax concept. When a trust is a grantor trust, it is income taxed to the grantor, pursuant to sections 671 to 677 of the I.R.C. (If a trust is not a grantor trust as to the original grantor of the trust, then it may be taxed to a beneficiary if they had a general power of appointment, pursuant to section 678). All … [Read more...] about Grantor Trusts
For tax purposes, does a grantor trust use a different taxpayer identification number or the grantor’s social security number? It depends. This blog explains. Stephen C. Hartnett, J.D., LL.M. Associate Director of Education American Academy of Estate Planning Attorneys, Inc. 9444 Balboa Avenue, Suite 300 San Diego, California 92123 Phone: (800) 846-1555 www.aaepa.com … [Read more...] about Grantor Trust Reporting
Often, there is confusion regarding the income taxation of trusts. There are two general types of trusts for income tax purposes: grantor trusts and non-grantor trusts. A grantor trust gets its status because the grantor has one of the powers listed in sections 671-678 of the Code. Some of these powers also trigger estate tax inclusion, like the power to revoke. Thus, a RLT is a grantor trust because, as its first name suggests, it is revocable. Some of the powers do not trigger estate tax … [Read more...] about Who Pays the Tax?
Over the past two weeks, I’ve looked at the insurance, tax, and asset protection considerations involved in transferring real estate into a trust. This week, I’ll touch on funding issues unique to irrevocable trusts, as well as those unique to revocable trusts. Irrevocable Trusts Typically, there are two categories of issues to consider when deciding whether to transfer real estate into an irrevocable trust. Both stem from the fact that, under normal circumstances, the purpose of these … [Read more...] about To Fund or Not to Fund: What to Know Before Transferring Real Estate to a Trust (Part Three of Three)
Last week, I discussed how the transfer of real estate into a trust could trigger issues regarding Homeowner’s Insurance and Title Insurance. There are many other issues to consider. This week, I’ll look at tax and asset protection considerations. Taxes Capital Gains Tax: Transferring a residence to a grantor trust (like a revocable trust) does not interfere with the grantor’s $250,000 (or $500,000 for joint returns) capital gains exclusion, provided the property otherwise … [Read more...] about To Fund or Not to Fund: What to Know Before Transferring Real Estate to a Trust (Part Two of Three)
There has been considerable back and forth over the release of 2012 Republican Presidential candidate Mitt Romney’s income tax return. He released his 2010 federal income tax return recently. It’s been widely publicized that the return reports over $21 million of income and that he paid tax at an effective rate of less than 14%. The return reveals the use of trusts. The return references a “blind trust.” A blind trust is used to avoid the appearance of an improper bias. Theoretically, the … [Read more...] about A Candidate’s Tax Return Shows Estate Planning