Trusts and Gifts Flashcards
What is a trust?
it is a separate legal entity (aka fiduciary) in which each entity has been created under a fiduciary relationship in which assets (called principal or corpus) have been transferred to the entity so that a person with fiduciary responsibility for the entity can hold legal title to the property for the benefit of named beneficiaries
How are trusts treated?
they are separate income tax paying entities and distributions made by these entities are deductible by the entity yet taxable to the recipient; all trust receipts and disbursements are classified as either principal/corpus or income
What is a simple trust?
it can only make distributions out of current income (not principal/corpus)
it is required to distribute all of its income currently
it cannot take a deduction for a charitable contribution
it is entitled to a $300 exemption in arriving at its taxable income
What is a complex trust?
it may accumulate current income
it may distribute principal/corpus
it may deduct charitable contributions
it is permitted an exemption of $100 in arriving at its taxable income
What distinguishes a present interest vs a future interest gift?
the postponement of a right to use, possess, or enjoy the property
What distinguishes a complete vs incomplete gift?
only complete gifts are subject to gift tax and qualify for the annual gift tax exclusion
an incomplete gift is one that is conditional (graduating college) or revocable (donor reserves the right to revoke the gift or change beneficiaries) and is not subject to the gift tax
