kamlet[at]panix.com (Arthur Kamlet) wrote:
- quote -

Not quite. There are many ways a trust can be a grantor
trust. The fact that the grantor is not the trustee does
not remove the possibility.

Specifically, a trust is a grantor trust (among other
things):

- to the extent the grantor has the power to determine who
will enjoy the benefits of trust assets (whether as trustee
or not);

- to the extent the grantor has the power to buy from the
trust for less than adequate consideration;

- to the extent the grantor has the right to borrow trust
funds without adequate interest or security;

- to the extent the grantor has the right to revoke any
portion of the trust.

In none of these cases need the grantor be the trustee.

Stu

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Paul <taxman[at]negia.net> wrote:
- quote -

In this case, OP says son is to be the trustee, so this
would be a grantor with someone other than the grantor as
trustee. So it would not be a disregarded entity to be
reported on OP's tax return.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Stuart O. Bronstein wrote:
- quote -

But given the way a trust scoots through the tax tables not
paying state income tax might not be such a great thing.

--
Frederick E. Jorden http://Tax-Accounting-Payroll.com
7825 Midlothian Tpk - 207 Richmond, VA 23235-5247
EMAIL knowtax[at]bigfoot.com
(804) 320-6210 FAX (804) 320-6211

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tazoman wrote:

- quote -

I'm not familiar with Virginia law, but if you were to
replace "Virginia" by "California", the trust would
DEFINATELY be taxable in California.

In addition, I'm not sure what you mean by "initial trust
property". If the trust is in Florida, the trust assets are
considered to be Florida (or unsourced) unless they are
tangible property located elsewhere...

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"tazoman" <tazoman[at]tazoman.dmp> wrote:

- quote -

No, sorry, you are incorrect.

Virginia taxes 100% of the income of a resident trust. The
definition of a resident trust includes one that is
administered in Virginia; for example, one that is
administered by a Virginia resident, or under the
supervision of a Virginia court. Va. Code Ann. § 58.1-302 ;
Va. Admin. Code 23 § 10-115-10. It has nothing to do with
the state where the trust is organized.

If your son is the trustee, the trust's net income will be
subject to Virginia income tax. However, if it is a simple
trust (that must, under the terms of the trust instrument,
distribute all of its income to you as beneficiary), then
there will be no taxable income at the trust level (except
for items that, under the trust instrument, go to corpus
rather than to income, as is sometimes the case with capital
gains). If it is a complex trust it gets a deduction from
its own taxable income for income that is distributed or
distributable to the beneficiary (under some pretty
complicated rules). There shouldn't be a whole lot of
income subject to tax at the trust level for either Virginia
or federal purposes.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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"tazoman" <tazoman[at]tazoman.dmp> wrote:

- quote -

If all the income is distributed to you there is nothing
left in the trust for the trust to be taxed on.

Florida has no state income tax and the trust has no
retained income to be taxed. I'm not sure wheather other
states tax gross income of the trust, but probably not.

You don't say whether it is a revocable or irrevocable
trust. Revocable trust is a non-entity for tax purposes. An
irrevocable trust will have Federal Gift Tax consequences.
Why are you doing this?

ed

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"tazoman" <tazoman[at]tazoman.dmp> wrote:

- quote -

There are various kinds of trusts, so the kind of trust you
have will determine the tax implications.

Most common for estate planning purposes is the revocable
trust. These trusts are transparent for tax purposes while
you are alive, and treated as if they don't exist until you
die.

If it is a Crummey trust (usually used to hold life
insurance), the trust is irrevocable but income is treated
as owned by the named beneficiaries of the trust, generally
your children.

There are many other kinds of trusts - check with your tax
lawyer and tax professional to help determine which one is
best for you.

- quote -

The trust is located generally where the trust assets are.
Your son can be in Virginia, but if all trust assets are in
Florida, you may be able to avoid state (but not federal)
income taxes, assuming the trust is created as a separate
tax-paying entity.

Frankly, if you want to to be irrevocable and a separate tax
entity, I'd guess that setting up a corporation might be
better, because bracket creep for trusts is a lot faster and
will result in higher federal income taxes than with a
corporation.

Stu

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"tazoman" <tazoman[at]tazoman.dmp> wrote
- quote -


Not quite. Trusts pay taxes, or at least some trusts pay taxes. If you
have a grantor trust, the trust income is reported on your individual
return. Other trusts that require the income to be paid out to you,
wouldn't owe any tax, but you would. You should consult a tax professional
in Florida as to the exact tax implications for the type of trust you plan
to establish.

Depending on the type of income, you or the trust may owe tax in Virginia
(I'm thinking rental property here).


--
Paul A. Thomas, CPA
taxman at negia.net

I intend to set up a trust and need help regarding tax
implications. The trust will generate income, which will be
distributed to me during my life, and when I pass, the trust
will be dissolved and its property will be distrbuted to my
children.

I am a resident of Florida, and my son (the desired trustee)
resides in Virginia. I would like to create a Florida trust
to minimize tax consequences.

My understanding is that the trust will be subject to
Florida law, so there will be Federal tax and no state tax.
The initial trust property will be in Virginia, and the
trustee will be in Virginia. Am I correct in my assumption?

TIA.

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