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Shane-CPA
Shane-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 265
Experience:  Shane Northrop is a Certified Public Accountant, Personal Financial Specialist and a Chartered Global Management Accountant
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My Parents live in FL and want to set up an irrevocable trust

Customer Question

My Parents live in FL and want to set up an irrevocable trust to transfer some of their assets to me in NJ before the end of the year. My question is what are the tax implications?
Submitted: 1 year ago.
Category: Tax
Expert:  Richard replied 1 year ago.

Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.

Good morning. There should be no tax consequences on this. The donee is not subject to gift taxes. And, unless we're talking about a huge gift amount, it's not likely to result in any tax on your parents. Each donor, and your mom and dad are each considered a donor, can give $13,000 per year per person under the annual
gift exclusion. In addition to that, each person has a $5,120,000 lifetime
exemption....which means a person can give a cumulative amount of up to $5,120,000
in gifts without incurring gift tax....the donor must file a gift tax return to
let the IRS know how much of the lifetime exemption is being used, but there
will be no gift tax until cumulative gifts have exceeded the $5,120,000.



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Customer: replied 1 year ago.

Hi, I am concerned about the tax implications for being the recipient of the trust. Thank you.

Expert:  Richard replied 1 year ago.
I am going to opt out to let an expert in the taxation of the trust itself address your question. Please do not respond as it will only slow that process down. Take care.
Expert:  Shane-CPA replied 1 year ago.
Hello...my name is XXXXX XXXXX I am a Certified Public Accountant. I look forward to assisting you with your tax questions related to becoming a beneficiary to an irrevocable trust.

Essentially by being named as a beneficiary of an irrevocable trust there is no tax consequence to you unless you receive a distribution from the irrevocable trust.

Because the Trust is a separate taxpayer, it will ordinarily pay tax on income earned that is retained in the Trust. If all of the income is distributed to the beneficiaries annually, the Trust may pay no federal income tax. Rather, the income may be taxed to the individual beneficiary or beneficiaries receiving the income. Certain states also require that Trusts administered in their jurisdiction also file a state income tax return.

A properly drafted irrevocable trust will shift the liability for income taxes on the income earned by the Trust assets to the Trust itself, or if the income is distributed, to the beneficiary. (NOTE: With the current high tax income rates to trusts, it is usually advisable to distribute all trust income to the beneficiaries, at least annually, to have the income taxed at the beneficiary’s lower tax rate. Be aware, however, that the income of a beneficiary under the age of 14 may be subject to taxation at the beneficiary’s parents’ tax rates.)

I hope this helps to address your concerns and answer any questions you have related to becoming an irrevocable trust beneficiary. If I can provide you with any additional assistance, please let me know.

If this answers your questions to your complete satisfaction, then I thank you for allowing me to assist you. If you are completely satisfied with the service I provided you today, please provide me with positive feedback so that I may receive credit for my response. If you feel exceptional service was provided, bonuses are greatly appreciated. If I can be of further assistance, please let me know. I hope you have a great day!

Best,

Shane - CPA
Shane-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 265
Experience: Shane Northrop is a Certified Public Accountant, Personal Financial Specialist and a Chartered Global Management Accountant
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