Tax Advisory Archives | vonKelco https://von-keller.com/help-center/category/tax-advisory/ Wealth Leadership Academy Mon, 05 Jun 2023 17:54:12 +0000 en-GB hourly 1 https://wordpress.org/?v=6.9.1 https://von-keller.com/wp-content/uploads/2025/12/vonkelco-logo-Icon-150x150.png Tax Advisory Archives | vonKelco https://von-keller.com/help-center/category/tax-advisory/ 32 32 Does the trust need to file annual income tax returns? https://von-keller.com/help-center/does-the-trust-need-to-file-annual-income-tax-returns/ Mon, 05 Jun 2023 17:54:11 +0000 https://von-keller.com/?post_type=epkb_post_type_1&p=4578 Yes. Trusts are separate legal entities and are required to file annual income tax returns. Generally, if income is not distributed to the beneficiaries, it is reported by the trust. If income is distributed to the beneficiaries, it is reported by the beneficiaries. However, trusts are often designed as grantor trusts, which require the grantor to report all income earned by the trust on the grantor’s individual return. This provides several benefits: (1) it doesn’t erode the amount the grantor has gifted to the trust, thus allowing the trust to stay as fully funded as possible; (2) it allows the grantor to pay the tax at the grantor’s tax bracket, which is often less than the highly compressed trust tax brackets; and (3) it allows the grantor to sell assets to the trust without recognition of gain.

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]]> Yes. Trusts are separate legal entities and are required to file annual income tax returns. Generally, if income is not distributed to the beneficiaries, it is reported by the trust. If income is distributed to the beneficiaries, it is reported by the beneficiaries. However, trusts are often designed as grantor trusts, which require the grantor to report all income earned by the trust on the grantor’s individual return. This provides several benefits:

(1) it doesn’t erode the amount the grantor has gifted to the trust, thus allowing the trust to stay as fully funded as possible;

(2) it allows the grantor to pay the tax at the grantor’s tax bracket, which is often less than the highly compressed trust tax brackets; and

(3) it allows the grantor to sell assets to the trust without recognition of gain.

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]]> Why would I want to sell assets to the trust? https://von-keller.com/help-center/why-would-i-want-to-sell-assets-to-the-trust/ Mon, 05 Jun 2023 16:40:57 +0000 https://von-keller.com/?post_type=epkb_post_type_1&p=4576 Irrevocable trusts are often set up as grantor trusts, which simply means that they are not recognized for income tax purposes (all of the income tax attributes of the trust, such as income, loss, gains, etc. is passed on to the grantor of the trust). The trust can therefore purchase a grantor’s asset for immediate payment or on an installment basis, with no recognition of gain and no gift tax consequences. The sale of an asset to an irrevocable trust is often recommended if the asset to be transferred is a life insurance policy, or if the asset is in excess of the annual exclusion amount and is expected to appreciate rapidly.

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]]> Irrevocable trusts are often set up as grantor trusts, which simply means that they are not recognized for income tax purposes (all of the income tax attributes of the trust, such as income, loss, gains, etc. is passed on to the grantor of the trust). The trust can therefore purchase a grantor’s asset for immediate payment or on an installment basis, with no recognition of gain and no gift tax consequences. The sale of an asset to an irrevocable trust is often recommended if the asset to be transferred is a life insurance policy, or if the asset is in excess of the annual exclusion amount and is expected to appreciate rapidly.

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]]> What are the tax benefits of establishing an irrevocable trust? https://von-keller.com/help-center/what-are-the-tax-benefits-of-establishing-an-irrevocable-trust/ Mon, 05 Jun 2023 16:39:04 +0000 https://von-keller.com/?post_type=epkb_post_type_1&p=4574 Generally, if you make a gift of an asset to a beneficiary during life, the asset is not included in your taxable estate at your death. An irrevocable trust provides an alternative to simply giving an asset to a beneficiary in order to reduce your taxable estate. With a trust, you can set the timing of distributions (i.e. when the beneficiary attains 30 years of age) as well as the reasons for distributions (i.e. for education only). Therefore, if your estate is close to or in excess of $2 million, including life insurance proceeds, and you are not comfortable making outright gifts to beneficiaries, you should consider setting up an irrevocable trust to take advantage of the substantial estate tax savings such a trust offers.

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]]> Generally, if you make a gift of an asset to a beneficiary during life, the asset is not included in your taxable estate at your death. An irrevocable trust provides an alternative to simply giving an asset to a beneficiary in order to reduce your taxable estate. With a trust, you can set the timing of distributions (i.e. when the beneficiary attains 30 years of age) as well as the reasons for distributions (i.e. for education only). Therefore, if your estate is close to or in excess of $2 million, including life insurance proceeds, and you are not comfortable making outright gifts to beneficiaries, you should consider setting up an irrevocable trust to take advantage of the substantial estate tax savings such a trust offers.

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]]> Who can be a beneficiary of a trust? https://von-keller.com/help-center/who-can-be-a-beneficiary-of-a-trust/ Mon, 05 Jun 2023 16:37:10 +0000 https://von-keller.com/?post_type=epkb_post_type_1&p=4572 Anyone other than the grantor may be named as a beneficiary of the Trust. Different family circumstances may dictate the need to structure the trust for different beneficiaries.

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]]> Anyone other than the grantor may be named as a beneficiary of the Trust. Different family circumstances may dictate the need to structure the trust for different beneficiaries.

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]]> Who should I name as trustee? https://von-keller.com/help-center/who-should-i-name-as-trustee/ Mon, 05 Jun 2023 14:49:32 +0000 https://von-keller.com/?post_type=epkb_post_type_1&p=4570 Any individual, other than the grantor, may serve as trustee of a trust, including the grantor’s spouse, children, family members, or friends. Of course, given the fiduciary duties required of a trustee, you’ll want to choose someone who is honest, diligent, and trustworthy (no pun intended!). If you would rather have an independent party act as trustee, there are a number of very well qualified professional trust companies in the community. If desirable, more than one individual may be named to serve as co-trustee.

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]]> Any individual, other than the grantor, may serve as trustee of a trust, including the grantor’s spouse, children, family members, or friends. Of course, given the fiduciary duties required of a trustee, you’ll want to choose someone who is honest, diligent, and trustworthy (no pun intended!). If you would rather have an independent party act as trustee, there are a number of very well qualified professional trust companies in the community. If desirable, more than one individual may be named to serve as co-trustee.

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]]> What are the trustee’s duties? https://von-keller.com/help-center/what-are-the-trustees-duties/ Mon, 05 Jun 2023 14:47:25 +0000 https://von-keller.com/?post_type=epkb_post_type_1&p=4568 The trustee is the person who is responsible for all aspects of the administration of a trust. The primary duties of any trustee are twofold: (1) to prudently invest and protect the assets of the trust, and (2) to make distributions to the trust beneficiaries according to the terms of the trust agreement. If desirable, more than one individual may be named to serve as co-trustee. Some individuals will name a family member or friend as the primary or alternate trustee. However, other individuals do not have family members or friends that they feel could (or should) take on this role. In such event, it may make sense to name a qualified bank or trust company to undertake this responsibility. The trustee is required to act in the best interest of the trust beneficiaries. This duty of loyalty is known as fiduciary duty, and it places a very high (and legally enforceable) standard of care and expectations upon the trustee.

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]]> The trustee is the person who is responsible for all aspects of the administration of a trust. The primary duties of any trustee are twofold: (1) to prudently invest and protect the assets of the trust, and (2) to make distributions to the trust beneficiaries according to the terms of the trust agreement. If desirable, more than one individual may be named to serve as co-trustee. Some individuals will name a family member or friend as the primary or alternate trustee. However, other individuals do not have family members or friends that they feel could (or should) take on this role. In such event, it may make sense to name a qualified bank or trust company to undertake this responsibility. The trustee is required to act in the best interest of the trust beneficiaries. This duty of loyalty is known as fiduciary duty, and it places a very high (and legally enforceable) standard of care and expectations upon the trustee.

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]]> How do I create an irrevocable trust? https://von-keller.com/help-center/how-do-i-create-an-irrevocable-trust/ Mon, 05 Jun 2023 14:46:38 +0000 https://von-keller.com/?post_type=epkb_post_type_1&p=4566 To create a trust, the grantor enters into a written trust agreement. He or she names a trustee to hold the property according to the terms of this trust agreement. The trust agreement identifies the beneficiaries and tells the trustee when distributions of trust property (including the original assets placed in trust, as well as the income on such assets) should be made to the beneficiaries. A well drafted trust agreement should plan for certain contingencies, such as what to do if the initial beneficiaries are no longer living.

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]]> To create a trust, the grantor enters into a written trust agreement. He or she names a trustee to hold the property according to the terms of this trust agreement. The trust agreement identifies the beneficiaries and tells the trustee when distributions of trust property (including the original assets placed in trust, as well as the income on such assets) should be made to the beneficiaries. A well drafted trust agreement should plan for certain contingencies, such as what to do if the initial beneficiaries are no longer living.

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]]> What is an irrevocable trust? https://von-keller.com/help-center/what-is-an-irrevocable-trust/ Mon, 05 Jun 2023 14:46:04 +0000 https://von-keller.com/?post_type=epkb_post_type_1&p=4564 An irrevocable trust is simply a trust with terms and provisions that cannot be changed by the grantor. This is distinguished from a revocable trust, which is commonly used in estate planning and allows the grantor to change the terms of the trust and/or take the property back at any time.

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]]> An irrevocable trust is simply a trust with terms and provisions that cannot be changed by the grantor. This is distinguished from a revocable trust, which is commonly used in estate planning and allows the grantor to change the terms of the trust and/or take the property back at any time.

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]]> What is a trust? https://von-keller.com/help-center/what-is-a-trust/ Mon, 05 Jun 2023 14:45:29 +0000 https://von-keller.com/?post_type=epkb_post_type_1&p=4562 A trust is a legal arrangement that provides for the ownership, management, and distribution of property. Think of a trust as a box into which someone places property. The person placing the property into the trust is known as the grantor of the trust. The person that oversees the property in the box is the trustee. Finally, the person who receives the benefit of the property held in the box is known as the beneficiary.

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]]> A trust is a legal arrangement that provides for the ownership, management, and distribution of property. Think of a trust as a box into which someone places property. The person placing the property into the trust is known as the grantor of the trust. The person that oversees the property in the box is the trustee. Finally, the person who receives the benefit of the property held in the box is known as the beneficiary.

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]]> Estate & Trust Planning https://von-keller.com/help-center/estate-trust-planning/ Mon, 05 Jun 2023 02:25:16 +0000 https://von-keller.com/?post_type=epkb_post_type_1&p=4560 From fiduciary income tax and estate tax to gift tax returns, our advisors maintain current knowledge of estate tax laws and how any changes along the way will impact your plans. Our goal is to maximize your premium dollars, with the blessing of the IRS.

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]]> From fiduciary income tax and estate tax to gift tax returns, our advisors maintain current knowledge of estate tax laws and how any changes along the way will impact your plans. Our goal is to maximize your premium dollars, with the blessing of the IRS.

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