Trust reads:
Irrevocable trust created to 1) avoid probate, 2) ensure assets owned are not considered an available resource in determining a beneficiary is eligible for Medicaid or other government benefits, 3) ensure assets owned are not subject to the claims of settlor’s creditors nor any creditors of any beneficiary, and 4) ensure all assets transferred to the trust are incomplete gifts for federal gift tax purposes.
Pursuant to federal income tax law, this Trust qualifies as a “grantor” trust for income and estate tax and is not required to have a separate id number. The id number for the trust is Settlor’s Social Security number.
Pursuant to federal income tax law, Settlor is treated as the owner of this trust for tax reporting because settlor has retained control of the assets transferred to the trust. Also, federal income tax law specifically states that a trust income tax return should not be filed, and all income should be reported on Settlor’s personal 1040 income tax return.
During the lives of the Settlor’s Parents, Mr. Parent and Mrs. Parent, the Trustee shall hold all assets contributed to this Trust as a separate “Parent Lifetime Trust”.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~
I don’t deal with trusts too often and was asked to look over the documents for a friend. My initial question is why wouldn't this be considered a completed gift if it is irrevocable?
It’s like a trust within a trust but the Settlor has control of both trust’s and income reported on Settlor’s 1040. It sure seems they are receiving the best of both worlds per se, it's not a gift, but yet it is no longer considered the parents assets. Can this be possible?
Any thoughts?
Irrevocable trust created to 1) avoid probate, 2) ensure assets owned are not considered an available resource in determining a beneficiary is eligible for Medicaid or other government benefits, 3) ensure assets owned are not subject to the claims of settlor’s creditors nor any creditors of any beneficiary, and 4) ensure all assets transferred to the trust are incomplete gifts for federal gift tax purposes.
Pursuant to federal income tax law, this Trust qualifies as a “grantor” trust for income and estate tax and is not required to have a separate id number. The id number for the trust is Settlor’s Social Security number.
Pursuant to federal income tax law, Settlor is treated as the owner of this trust for tax reporting because settlor has retained control of the assets transferred to the trust. Also, federal income tax law specifically states that a trust income tax return should not be filed, and all income should be reported on Settlor’s personal 1040 income tax return.
During the lives of the Settlor’s Parents, Mr. Parent and Mrs. Parent, the Trustee shall hold all assets contributed to this Trust as a separate “Parent Lifetime Trust”.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~
I don’t deal with trusts too often and was asked to look over the documents for a friend. My initial question is why wouldn't this be considered a completed gift if it is irrevocable?
It’s like a trust within a trust but the Settlor has control of both trust’s and income reported on Settlor’s 1040. It sure seems they are receiving the best of both worlds per se, it's not a gift, but yet it is no longer considered the parents assets. Can this be possible?
Any thoughts?
Comment