Does the Trust have to pay Federal and State Estate Income Taxes at the time of Death on the value of transferred assets contained within the Trust?
Country relating to Question: United States
State (if USA): Maryland
There are two different tax systems that might be at work here.If the trust is irrevocable and has its own tax I'd number, then it will pay it's own income taxes as per the tax rates established for trusts (different from the tax rates for individuals).If the trust is not irrevocable, and still essentially owned by the grantor, then the income, gains, etc. all get passed through to the grantor.Estate taxes, however, are the transfer taxes that are due from the estate. What kind of trust is this and when was it established?If you'll provide a little more info, I can give you a more specific answer,Let me know ...MBA, CFP, Teacher41130.6888351852
If you were asking about the estate taxes, then yes the taxes are paid using form 706,but right now we have a $5 million exemption on the amount transferred (must be lowered by lifetime gifts to anyone over the 13,000 threshold).
...and to try to clarify a little more for you.When someone dies the ESTATE taxes are charged on the value of the assets. (The executor, personal representative or sometimes the spouse, also has to file the last tax return for that individual) ... if the person was married, then the widow or widower, can file a joint return one last time.But the estate taxes (if there are any after that $5,000,000 exemption at the federal level) are charged against the value of the assets, not the income that came from them while the individual was alive (which would have to be reported on that last tax return for the individual).And finally, if the assets were gifted to an irrevocable trust BEFORE the person died, the it will not be a part of that estate and there will be no estate tax on the estate of the person that died (on those dollars)....hope this helps!If you have have no further answers on this issue, I'd appreciate you rating the answer a 3, "OK," or better (that's how we get paid).But if you have other question on this issue, come back here, so you won't have to pay again.Thanks!