What is the tax treatment of trusts?

In Washington, trusts are legal entities created to manage and distribute assets. They often provide tax benefits for created for estate planning and asset protection. When it comes to taxes, trusts generally receive preferential treatment, meaning they usually receive lower tax rates than individual taxpayers. Trusts are generally subject to an income tax rate of 37% on income and gains in excess of $13,000. Trusts may also be liable for estate taxes. In the state of Washington, estate taxes are imposed on estates valued at $2.193 million or more. Trusts may also be subject to a generation-skipping transfer tax (GSTT). This tax is imposed when money or assets are transferred to a beneficiary two or more generations below the grantor, such as a grandchild. GSTT is currently set at 40%. Trusts can receive tax deductions for expenses related to trust assets, such as professional fees, taxes, and administrative costs. Deductions are limited to the amount of income the trust is required to report for the year. Through careful planning and consideration of the tax laws, a trust can provide both tax efficiency and asset protection. When considering the tax treatment of trusts, it is important to consult with a qualified professional such as an estate attorney or financial advisor.

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