What are the tax implications of establishing a trust?

The tax implications of establishing a trust in New York can vary depending on which type of trust is set up and what assets it will contain. Generally speaking, a trust can help reduce an individual’s estate tax liability and allow those assets to pass to the trust’s beneficiaries, free from federal and state income taxes. When setting up a trust, it’s important to note that the grantor of the trust (the person who sets up the trust) may be liable for gift and/or estate taxes on certain property transferred to the trust. Furthermore, the trust may be subject to an annual income tax and the trustee of the trust will need to file any required tax returns. In addition to federal taxes, trusts in New York are subject to several state taxes. For example, New York has an estate tax if the value of the trust’s assets are greater than the estate tax threshold. The trust may also be subject to New York’s real estate transfer taxes and the assets in the trust may be subject to New York’s inheritance taxes. Overall, trusts can be a great way to help reduce taxes and pass assets on to the beneficiaries. However, it’s important to understand the possible tax implications prior to setting up the trust. It is recommended to speak with a qualified attorney in your area who can better explain the various taxes associated with establishing a trust in New York.

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What are the tax implications of establishing a trust?

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