Income Tax Reporting Requirements for Grantor Trusts

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  • Опубликовано: 7 дек 2024
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    This post address the income tax filing requirements for revocable trusts and for certain kinds of irrevocable trusts.
    Trusts are popular tools for many reasons, including probate avoidance and asset protection. Essentially, there are two types of trusts: revocable trusts and irrevocable trusts.
    People easily get confused about the income tax filing requirements for trusts. Some trusts must file a tax return. Others do not. Here's a quote from the IRS website regarding a trust's requirement to file an income tax return:
    "Trusts must file a Form 1041, U.S. Income Tax Return for Estates and Trusts, for each taxable year where the trust has $600 in income or the trust has a non-resident alien as a beneficiary. However, if the trust is classified as a grantor trust, it is not required to file a Form 1041, provided that the individual grantor reports all items of income and allowable expenses on his own Form 1040, U.S. Individual Income Tax Return. Thus, the grantor/individual would pay the total tax liability upon the filing of his return for that taxable year."
    It's important to determine whether a trust is a grantor trust. A trust is treated as a grantor trust when a grantor or another person is treated as the owner of the trust income or principal or both for federal income tax purposes. This means the grantor or such other person must include in the computation of taxable income all items of “income, deductions, and credits against tax of the trust” attributable to the portion of the trust over which the grantor
    or such other person is deemed to be the owner. In other words, the grantor or such other person treated as the owner of the trust is taxed to the same extent as if he or she had received the
    item directly. Section 671; Treas.Reg. §1.671-2(d).
    Sections 673 through 679 set forth the situations in which a grantor or another person is deemed to be the owner of the trust, thereby creating a grantor trust.
    The power to revoke a trust is one of the powers that causes a trust to be a grantor trust. Thus, all revocable trusts are grantor trusts.
    Regarding an irrevocable trust, we must look to the provisions of the trust to determine if powers were retained by the grantor cause the trust to be a grantor trust. Powers often provided in an irrevocable trust that cause the irrevocable trust to be treated as a grantor trust include the power to control the beneficial enjoyment, and the distribution of the trust income to the grantor or grantor's spouse.
    If your irrevocable trust is a grantor trust, then all income earned by your trust is reported on your personal income tax return, not a separate trust tax return.
    This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.
    Paul Rabalais
    Estate Planning Attorney
    www.RabalaisEstatePlanning.com
    Phone: (225) 329-2450
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Комментарии • 25

  • @shaggydog8291
    @shaggydog8291 2 года назад +1

    Thank you so much. I've been trying get this very answer from my Attorney. And after 6 months, he still hasn't got back to me. I'll tell him to watch your video because I don't think he knows. You just dropped my stress factor by 90%

  • @Bigsas14
    @Bigsas14 2 года назад

    This video was a big help! I’m helping a family member and now have the list of questions to ask to determine the correct filing. Thank you for putting this out here!

  • @chs6467
    @chs6467 4 года назад +7

    Thank you so much for this clear and concise explanation. You have supplied a very good service to the public. cs

  • @kylehallacappellaman3435
    @kylehallacappellaman3435 4 дня назад

    You would do well to use some type of marker board to help in your explanations. It would help get the points across, I think.

  • @dancingcpa1
    @dancingcpa1 2 года назад

    I’m a cpa and I really thank you for these videos

  • @BARbaraMariam
    @BARbaraMariam 2 месяца назад

    Great content, as always! Just a quick off-topic question: I have a SafePal wallet with USDT, and I have the seed phrase. (air carpet target dish off jeans toilet sweet piano spoil fruit essay). Could you explain how to move them to Binance?

  • @williamedwards6519
    @williamedwards6519 5 лет назад +1

    Thank you so much! this helps chisel the first foothold in my long road ahead. Question- Grantor trust, revocable trust, Grantor includes an "everything I own, all income, etc, is in the trust, Grantor holds no claim to deeds, titles, etc. " the same day the trust is signed. Grantor . months later, is deemed mentally incapable to handle her own affairs, the trust is now irrevocable. when does the trustee have to 1041 and get an ein?

  • @janinenesbit3878
    @janinenesbit3878 10 дней назад

    If the revocable trust becomes irrevocable at death of the grantor, and the grantor passes, is a Form 1041 tax return required to be filed?

  • @tom73458
    @tom73458 6 лет назад +1

    Thanks for the informative, and unsolicited, information. Much appreciated.

  • @RealNet.BusinessAdvisors
    @RealNet.BusinessAdvisors 6 лет назад +1

    Great video - Category of the video is Comedy- consider change it to educational and what a great educational piece - Thank you !

  • @erikseanwilson
    @erikseanwilson 3 года назад

    Love your videos!! Very informative. Question: Profit (mutual fund sale at a profit) in revoc trusts is taxed at ordinary bracket (to grantor) or at the trust level.?

  • @jcman240
    @jcman240 4 года назад

    What about the tax treatment for the beneficiary/trustee of an irrovacable trust? Does all the trust income have to be reported on beneficiaries individual tax return or can the trust report the first 12k if the marginal rate is less?

  • @Gard614
    @Gard614 Год назад

    Where can the three sentences you read from the IRS be found?

  • @airdice1188
    @airdice1188 Год назад

    thank you for the great explanation

  • @MensurUtt
    @MensurUtt 2 месяца назад

    Thanks for the interesting content! 😍 Just a small off-topic question: 😅 I found these words 😅. (behave today finger ski upon boy assault summer exhaust beauty stereo over). What is this? 🤔

  • @garyrogers6977
    @garyrogers6977 2 года назад

    What happens after the grantor dies and there are provisions in the trust continues?

  • @paxetbonum4934
    @paxetbonum4934 5 лет назад

    Very good cleared up a lot. Thanks

  • @tlcbear411
    @tlcbear411 Год назад

    Thanks so much

  • @gloriajara5014
    @gloriajara5014 4 года назад

    I Love this video, thanks for your help!

  • @cheryldodd-marko9787
    @cheryldodd-marko9787 3 года назад +1

    🕊🇺🇲💕

  • @Bigsas14
    @Bigsas14 2 года назад +1

    This video was a big help! I’m helping a family member and now have the list of questions to ask to determine the correct filing. Thank you for putting this out here!