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Is an irrevocable family trust taxable?

Customer Question
is an irrevocable family trust taxable?
Submitted: 1 year ago.Category: Tax
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Customer reply replied 1 year ago
Is the transfer to an "irrevocable family trust taxable?
Customer reply replied 1 year ago
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3/20/2016
Tax Professional: socrateaser, Lawyer replied 1 year ago
socrateaser
socrateaser, Lawyer
Category: Tax
Satisfied Customers: 39,376
Experience: Retired (mostly)
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Hello,

All trusts are taxable. The issue is who pays? A revocable trust is taxable to its settlor/grantor/creator. An irrevocable trust may be taxable to the trust itself, to the beneficiaries, or to the settlor/grantor/creator -- dependent upon numerous factors:

1. A trust's distributed net income (DNI) is taxable to beneficiaries who receive the income.

2. A grantor trust's income is taxable to the grantor. The subfactors that create a grantor trust are extremely complex, and it would require a 10,000 word dissertation to describe the factors and provide examples.

3. Trusts that do not fall within either of the above circumstances, are taxable directly to the trust, similar to how a corporation is taxed.

In order to determine whether or not a particular trust has taxable income, and the person(s) to whom that income is taxable, requires a careful review of the trust provisions. This sort of review is beyond the scope of services which can be lawfully provided in this forum. I will send you a premium services offer if you are interested in having your trust instrument reviewed (customary legal services fees will apply). You may accept or decline the offer, at your convenience.

If you accept, I will provide my contact information. If not, then I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer -- otherwise, the website retains your entire payment, and I receive nothing for my efforts in your behalf.

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Tax Professional: socrateaser, Lawyer replied 1 year ago

Hello again,

I see that you have reviewed my answer, but that you have not provided a rating. Do you need any further clarification concerning my answer, or is everything satisfactory?

If you need further clarification, concerning this matter, please feel free to ask. If not, I would greatly appreciate a positive feedback rating for my answer -- otherwise the website retains your entire payment, and I receive nothing for my efforts in your behalf.
Thanks again for using Justanswer!

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