|Statement||by Paul M. Fletcher.|
|LC Classifications||KF6443 .F57|
|The Physical Object|
|Pagination||1 v. (loose-leaf) ;|
|LC Control Number||93005064|
A revocable trust -- a type of grantor trust -- is a trust in which the owner keeps control of the assets. Some people believe that revocable trusts can enable income tax avoidance. This is a misconception because the IRS requires the owner of the trust to pay taxes on any income earned from assets in the trust. Many individuals use revocable or "living" trusts as a personal checkbook, paying bills or making gifts with trust property as though it were their own. For most tax purposes, it is their own, since the grantor-trust rules of IRC Secs. treat the grantor as the owner of the trust corpus. Revocable trusts are "tax-transparent"--that is, 1) the assets of the trust are includible in the grantor's estate for estate tax purposes (IRC section ); 2) transfers to the trust during the grantor's life are incomplete gifts for gift tax purposes [Treasury Regulations section (c)] and therefore do not give rise to gift tax or to. Tax Consequences for Revocable and Irrevocable Trusts. Revocable and irrevocable trusts are treated quite differently under U.S. tax law. The main reason for .
File estate income tax returns annually. A trust is a taxable entity, and any income it earns must be reported annually, either on the grantor’s Form , in the case of a revocable trust, or on Form , U.S. Income Tax Return for Estates and Trusts. A joint revocable living trust is a single trust created by a husband and wife, into which they transfer their assets. Checklist of Potential Tax Dangers for Joint Revocable Living Trusts. it is unlikely that a basis step-up will be obtained for the entire principal of the trust. "How is income from a revocable trust reported?" Revocable trusts (aka revocable living trusts or living trusts) are grantor trusts and generally treated as disregarded entities for federal income tax reporting purposes. Such trusts can report as . On top of their considerable estate tax planning benefits, grantor trusts may even qualify for a step-up in basis at death, 3 at least according to some attorneys and tax scholars. 4 At the same time, the IRS has vehemently rejected the theory that grantor trust assets receive a basis step-up at death. 5 The guidance project apparently aims to.
Many people who create a revocable living trust place their homes in the trust. By doing this, you do not give up your right to claim a capital gains tax exclusion when you sell your house. When you sell your primary residence, you get to exclude up to $, as an individual or $, as a couple if you have lived in your house for more. The cost basis of your assets resets when your heirs take possession of those assets. This means your heirs can sell your transferred assets very quickly without incurring a capital gains tax liability. State laws on joint revocable trusts vary, but in some states your joint revocable trust becomes an irrevocable trust when one of the trustees. Whether to choose a revocable trust or an irrevocable trust depends on the asset protection you want and the tax treatment you need. Complete Asset Protection If your goal is complete asset protection, you would consider an irrevocable trust because it is “permanent” and the court and the IRS will treat the trust as separate from you. Revocable Living Trust may also minimize tax problems, particularly as they relate to the Grantor's domicile and residence. Retention of corpus by the Trustee places the assets beyond the jurisdiction of the taxing authorities where the Grantor temporarily resides. 5. Pre-Death Administration. A potential disadvantage of a Revocable Living Trust.