Identifying Trust Types and Tax Consequences: Analyzing the Trust Document, Revocable vs. Non, Grantor vs. Non

Identifying a specific trust by type is critical in order to report, administer, and tax the trust and its beneficiaries properly. All trusts have common attributes. Each has a grantor, a trustee, and beneficiaries. The taxation of and reporting responsibilities vary significantly depending on how a trust is structured. Irrevocable trusts generally have their own EIN (employer identification number) and file and report their income and deductions on Form 1041, U.S. Income Tax Return for Estates and Trusts. They might, however, be a grantor or non-grantor trust. If a grantor trust, the grantor reports the trust income and deductions on the personal income tax return.

Trusts have the steepest graduated tax table reaching a maximum tax rate of 37 percent at only $15,650 (2024). This low threshold makes it crucial that trust advisers understand the tax attributes of a particular trust. Specific provisions in a trust document are key to identifying a trust's classification and ultimate tax consequences. Trust advisers must be able to recognize and interpret these relative provisions.

Listen as our panel of top-level trust advisers demonstrates how to identify specific trusts and their relative tax consequences.

1. Identifying trusts and their tax consequences: Introduction
2. Grantor trusts
   • Intentionally defective grantor trust (IDGF)
   • Qualified Subchapter S trust (QSST)
   • Grantor retained annuity trust (GRAT)
3. Non-grantor trusts
   • Simple
   • Complex
4. Revocable
5. Nonrevocable
   • Irrevocable life insurance trust (ILIT)
   • Spousal lifetime access trust (SLAT)
6. Trust income tax rates
7. Examples

The panel will review these and other critical issues:

• Reporting requirements for grantor trusts
• Identifying irrevocable trusts from language in the trust document
• Distribution requirements for simple and complex trusts
• Illustrative examples including trust documents and tax scenarios for specific trust types

Learning Objectives

After completing this course, you will be able to:

• Identify simple trusts from language in a trust document
• Determine why and how some grantor trusts are intentionally defective
• Decide how to minimize tax on trusts and trust distributions
• Ascertain key tax reporting differences of grantor and non-grantor trusts

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of estate, gift and trust taxation including various trusts types, the unified credit, and portability.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).