October
2002 On-line Tax Planning
A Trust That
Doesn't Save Taxes
Living trusts are often used for estate-planning purposes. If you
are considering setting one up, it's important to understand how your taxes
could be affected.
Basic Plan
The term "living trust"
typically refers to a trust that is revocable, meaning that the person who
creates it (the "grantor") can terminate the trust at any time.
Usually, the grantor is the lifetime beneficiary of the revocable trust and also
its trustee or co-trustee. If desired, the grantor also may retain the
power to change the terms of the trust. In many respects, then, placing
the assets in the trust changes nothing: The grantor can take property out
of the trust, control trust investment decisions, and end the trust arrangement
at will.
No Surprise
Knowing all this, it probably comes as
no surprise that transferring assets to a revocable living trust doesn't change
anything for tax purposes either. The income of a revocable living trust
is taxed directly to the grantor during the grantor's lifetime. And the
value of the trust assets must be included in the grantor's gross estate.
Thus, while there may be several advantages to creating a revocable living
trust, saving taxes is not one of them.
The benefits a revocable living trust can
provide include:
Please give us a call, at your convenience, for
more information.
Tax
Planning Archives
For More Information Contact:
Bucheri McCarty & Metz LLP
2366 W. Boulevard
P.O. Box 2147
Kokomo, IN 46904-2147
Telephone: (765) 236-2300
FAX: (765) 236-2333
Internet:
info@bmmcpas.com
