A trust or a decedent’s estate is a separate legal entity, which must file its own income tax returns and pay tax on any income it generates such as interest and dividend. There are some exceptions to this rule. A person who sets up a so called living trust, in which she controls the trust funds during her life time will treat the income as her own, and the trust will not have to pay separate income tax. After the settlor’s death though the trust will become irrevocable, and it will assume the role of a separate taxpayer filing returns and paying taxes on its annual income.
Many of the income tax rules that apply to individuals also apply to trusts and estates, but there are notable differences. One variation that can have a substantial affect is tax rates. A single individual will only pay the top 35% income tax rate on income over $373,650.00 a year. However, a trust or a decedent’s estate will pay the 35% rate on all of its income over $11,200.00 a year. Obviously you need to maximize the amount of income that is taxed to related individuals rather than to the estate or trust, and you should consult an estate planning attorney who understands the tax implications of maintaining income producing property in the trust or estate.
Wednesday, September 28, 2011
Tuesday, September 27, 2011
Legal Separation:
A legal separation is a legal procedure that allows a family court judge to settle certain matters for couples who are not living together, but who have not obtained a divorce. An individual asking the court for a legal separation cannot be at fault in causing the separation.
In a legal separation a court can order one party to pay child support or alimony. It can also award child custody or set a visitation schedule for children. Court orders in a separation can always be revised though, if circumstances change, and a judge can not make a final settlement of the property division in this procedure.
Legal separations are not very common, and as a divorce attorney I find that the majority of people who initially ask about legal separations ultimately decide that it is not right for them. I would explain this by the fact that if the parties are eventually going to get divorced, they will end up going through two court procedures instead of one, if they first file for a legal separation.
Legal separations are sometimes necessary though, if the parties are not planning to divorce and they need the intervention of the courts to determine issues concerning children or support.
In a legal separation a court can order one party to pay child support or alimony. It can also award child custody or set a visitation schedule for children. Court orders in a separation can always be revised though, if circumstances change, and a judge can not make a final settlement of the property division in this procedure.
Legal separations are not very common, and as a divorce attorney I find that the majority of people who initially ask about legal separations ultimately decide that it is not right for them. I would explain this by the fact that if the parties are eventually going to get divorced, they will end up going through two court procedures instead of one, if they first file for a legal separation.
Legal separations are sometimes necessary though, if the parties are not planning to divorce and they need the intervention of the courts to determine issues concerning children or support.
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