Basics of Trust Taxation 2014
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- Опубліковано 7 жов 2024
- Basics of Trust Taxation 2014
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Question : So is it beneficial to transfer assets via a trust from the settler to the beneficiary (ex.Children) while alive thus creating "No Disposition" versus waiting until death at which time there would be Disposition leading to taxation.
Amir, the only way that the 'no disposition' to which you refer applies is if the settlor (or the spouse, or both of them) is also the beneficiary. You can review this at 4:10 of the video. Thanks for watching and posting.
Hopefully I am understanding you correctly in that it appears the American Tax Relief Act imposes a 39.6% + 3.8% tax on the trust if it accumulates income over $12,500 and therefore if the beneficiary is at a very low rate pass that income on to them versus accumulation in the trust...
George Seward Sorry; all these videos are Canadian. My knowledge of US tax code is limited.
Thanks for the quick input.
George Seward yes, taxes on trust in us are much much higher than those on personal income. A trust reaches the highest tax bracket of about 39% when it has income of about 12,000. So it's better to set up a simple trust, where all yearly income is distributed to the beneficiary and taxed to them. Or make the trust a grantor trust, of which the income is taxed to the grantor, the one who sets up the trust
Thanks Dike the light finally went on last evening when I was listening to other videos.
Thank you for the excellent series. Very informative. At 4:35, you say "if there is no change in beneficial ownership, then there is no disposition", but then at 5:15 you say the settlor must be 65 or older. So it sounds like if someone is still alive and puts property into the trust, then there WILL BE a disposition if they are under the age of 65. Also are these terms you are using (Testamentary & Inter Vivos) the same thing as a Living (or Revocable) Trust?
J Kip sorry for the delayed response. I am not sure why I don't get my UA-cam notifications. The settlor only has to be 65+ for a qualifying alter ego or spousal trust.
Hi Jason, I have a question. Starting in 2016, both testamentary and inter vivos trust are taxed at the highest flat marginal tax rate (except for testamentary trust where the disabled individual with disability tax credit is the beneficiary). When income is generated from the trust and paid directly to the beneficiaries under inter vivos trust, is it still taxed in their hands in 2016? What if the income is paid directly to the beneficiaries under testamentary trust? Thank you very much!
+Thomas Park With any trust, if the trust is flowed out to the beneficiaries, then it is taxed as if the beneficiaries had earned that income directly.