Sprinkling trusts save taxes while allowing trustees to provide for family members

Article Abstract:

Sprinkling trusts allows taxpayers wide discretion over the distribution of income or the principle, offering the trustee wide latitude to distribute property over a class of beneficiaries. Sprinkle trusts are highly flexible and allow taxpayers to maximize advantages as regards income and generation-skipping and transfer taxes. Due to changes to the generation-skipping tax wrought by the Tax Reform Act of 1986, sprinkle trusts can be of value in distributing wealth upon succeeding generations by allocating the generation skipping tax exemption to the trust in order to meet the needs of the decedents. Sprinkling trusts allow the distribution of wealth to those family members most in need, and since beneficiaries retain no right to trust income, they incur no liabilities for creditors claims.

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Fiduciary return offers tax planning opportunities for estates and trusts

Article Abstract:

Form 1041, 'US Fiduciary Income Tax Return,' taxes entities and entity members of partnerships. The form should be filed by estate representatives or trust fiduciaries. Form 56, 'Notice Concerning Fiduciary Relationship,' notifies the IRS of estate or trust fiduciary status. Trusts can be created by wills or living grantors and all requirements establishing a trust are met. A taxpayer's death determines the creation of an estate. Trusts and estates are taxed and entitled to deductions based on reportable income and are considered non-corporate, similar to individuals taxpayers. However, income earned prior to a decedent's death is usually taxed as income to the recipient. Fiduciaries' incomes are prevented from being double taxed by distribution deductions.

Fiduciary duties

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Spousal remainder trusts: a new and effective income shifting tool

Article Abstract:

Interest free loans and Clifford trusts have been used for years to transfer income to family members in order to avoid certain taxes or taxation at higher than necessary rates. The spousal remainder trust is a similar investment vehicle, in that (like the Clifford trust instrument) income is shifted to a lower-bracketed family member. Unlike the free loan or the Clifford trust, spousal remainder trusts revert to the trust founder's spouse, rather than to the trust beneficiary, when the trust is terminated. The estate tax, gift tax and income tax consequences of establishing a spousal remainder trust are analyzed.

Methods, United States, Economic aspects, Tax planning, Estate planning, Charitable trusts, Grantor trusts, Spousal remainder trusts

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