What taxes can I avoid with a trust?


Income Taxes are not affected by a trust. You file your income taxes the same way you did before creating a trust. No additional tax returns should be filed for your trust. IRS Regulations require that a trust uses the tax identification number - your Social Security Number - as the trust's identification number. Please refer to your tax advisor with any questions.


What are Gift and Estate Taxes?

Federal tax law gives every individual a "Unified Gift and Estate Tax Credit." This exemption is the amount of your assets which can pass to your heirs “estate tax free”; there is an unlimited deduction for assets passing to a surviving spouse.

On January 1, 2013, President Obama signed into law The American Taxpayer Relief Act of 2012 (“ATRA”). Among its many tax provisions, ATRA makes permanent the $5.25 million (plus inflation) gift and estate tax exemption amount.

The gift tax is still unified with the estate tax; a unified estate and gift tax exemption means the $5.25M threshold is applied to total transfers, whether by gift during lifetime or by inheritance on death. The 2012 Act also provides for a flat 40% tax rate for any transfers in 2013 and future years that exceed the $5.25M gift or estate exemption amount.