Trust set up for minor

[JT2307]

client set trusts up for each of his children to have their share of the gas royalties deposited into - there are no distributions made to the children. Am I thinking this correctly - so the trust would pay the taxes on the income and then when it is time for the money to be distributed the child would not have to pay any taxes on the money? And I know it is taxes at a higher rate on the trust return.

What am I missing - what is the advantage of putting money into trusts for minors?

[Burke]

Well it isn't to save money on taxes, unless the trust rate is lower than the TP's, which isn't likely. The child would not pay tax on the money the trust has already paid tax on. If distributions are made to the child, then there may be a taxable event to the child up to the gross income for the year of distribution. The TP may have wanted to set up some kind of entity that sheltered the funds from creditors, build up a portfolio for the child, save for college, etc. Did he say why? Is it a lot of money?

[JT2307]

Someone told him

He said a friend told him that was what he should do. I am sure the lawyer just saw $$ signs...

I am going to ask him again.