One of the primary goals for estate planning is to minimize taxation on your estate, ensuring that your assets got towards caring for your family and not towards the state. One of the most effective tools used in estate planning is a trust. Here’s some insight into how family trusts are taxed, from an elder law attorney in New Jersey.
Grantor vs. Non-Grantor Trusts
Trusts fall into two categories that are especially relevant when talking about taxation. A grantor trust often allows the person creating the trust the right to withdraw assets from the trust – so, most revocable trusts are grantor trusts. This means that the trust does not have to file its own tax return. Instead, the grantor much include any income from the tax in their own, individual tax return and pay accordingly.
If a trust does not allow this (an irrevocable trust, for example), then it will have to file a tax return that can mean that the trust itself pays tax and that those beneficiaries earning an income from the trust will have to pay tax as well. This can become incredibly complex – for example, if they trust has to pay out it’s income to a beneficiary, then it is entitled to certain deductions, while remaining income that stays within the trust gets taxed to the trust directly.
Always Get Expert Advice When Creating a Trust
If you’ve looked into creating a trust for your family, then you know that there are many different trusts out there to meet a vast range of goals. These trusts can also be tailored to your specific needs, which makes them even more complex. This makes it essential that you work with an experienced professional to develop a trust that achieves your goals and that you are completely aware of how taxation will impact this trust, so that you can make the best possible informed decision.
Speak to a Leading Elder Law Attorney in NJ Today for Compassionate Advice
If you would like assistance in understanding and accessing your Medicaid and Medicare benefits, speak to Frank R. Campisano today. Experienced in elder law, compassionate and committed to his clients, you’ll receive the highest quality legal expertise and guidance that will help you secure better care. In addition, you can also prepare additional estate planning documents, such as your Last Will and Testament, Healthcare Proxy, Power of Attorney documents and trusts. For more compassionate legal guidance and a free consultation, please contact us or visit our website at https://www.scclegal.com/