Creating a separate EIN for the trust is easy, but if the trust has more than $600 in annual income, then the trust has to file IRS Form 1041 along with a state income tax filing for the trust as an entity. There may be state income taxes for the trust as an entity. I think original post may have misused the term "simple trust" and maybe just means a small trust or a subtrust. I often recommend subtrusts for this reason to some of my clients to limit or avoid taxes taxes. For example, a trustee administering a trust for grandchildren can create have a separate subtrust for each grandchild. In my state of Utah, each trust as an entity can also receive the state income tax credit for contributions to 529 accounts. If you are paying an accountant to file IRS Form 1041 and a state tax return, then you have to look to see if it's worth it to create a separate trust. There is more paperwork. But if the trustee learns how to file taxes on their own with IRS Form 1041, then it's just the time spent by the trustee and the cost of a postage stamp, and any state income tax return and filing.
Personally, I have mostly just used 529s and custodial UGMA accounts (where I can do tax gain harvesting up to the kiddie tax limit). I like the simplicity of a 529. But my personal trust allows for the trustee to create subtrusts to potentially limit tax liability.
Personally, I have mostly just used 529s and custodial UGMA accounts (where I can do tax gain harvesting up to the kiddie tax limit). I like the simplicity of a 529. But my personal trust allows for the trustee to create subtrusts to potentially limit tax liability.
Statistics: Posted by legalwriter1 — Mon Dec 16, 2024 9:13 am — Replies 8 — Views 670