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Revocable Trust Taxes

Posted by Chris Peterson | Sep 05, 2014 | 0 Comments

Revocable Trust Taxes

Revocable Trust TaxesRevocable trusts have their uses in estate planning, but avoiding taxes is not one of them. The main value of revocable trusts is that they help avoid probate, which can be a long, drawn out process. If you are looking for a means of avoiding taxes on your estate, a College Station living trust attorney will work with you to determine an optimal plan for your needs.

What Is a Revocable Trust?

A revocable trust allows assets to be placed outside of the estate, yet give the settlor an unusual degree of control of the assets placed within it. As your College Station living trust attorney will tell you, by naming yourself as trustee you are able to:

  • Alter the terms of the trust
  • Purchase and sell assets held in trust
  • Revoke the trust altogether

However, such a high degree of control comes with a price; namely, the assets remain as part of the taxable estate.

What Taxes May Affect the Trust?

Your College Station living trust attorney will advise you that if the main reason you want to create a trust is for avoidance of taxes, a revocable trust is not suitable to your needs. If, for instance, the assets held in trust earn interest, you will be required to report the interest as unearned income. Should you enjoy a profit upon sale of assets, you will have to pay capital gains. Further, depending upon the size of the estate overall, the assets may be subject to estate taxes.

The settlor can, on the other hand, leave all of the estate to his spouse and thereby avoid estate tax. This only will be an issue if the estate is substantial. Estate taxes will, however, be due upon the death of the second spouse.

Work with a College Station living trust attorney if You Are Considering a Revocable Trust

If you would like more information about revocable trusts, avoidance of taxes, and other estate planning matters, a College Station living trust attorney can help. Call Peterson Law Group today at 979-703-7014.

About the Author

Chris Peterson

Chris Peterson is the owner of Peterson Law Group. He practices primarily in the areas of wills, trusts and estate planning; probate and trust administration; elder law; and business law. Chris is also the owner of Brazos 1031 Exchange Company.


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