Originally Published in ACTEC Law Journal.
This article will discuss some of the potential income tax disadvantages of non-grantor trusts and how they might be avoided or mitigated. In the first part, it will describe some of the advantages and disadvantages of using such trusts both under current law and under legislation proposed in 2021 in Congress (some of which may have been enacted by the time this article is published). In the second part, the use of the charitable deduction allowed to a trust is discussed. In the third part, the potential use of a trust described in Section 678 is discussed. In the fourth part, having the trust beneficiaries include a so-called “S corporation” in explored. In the fifth part, a summary and conclusions are offered on whether the income tax burden on non-grantor trusts may be reduced and some of the consequences of attempting to do so.
To read the full article, click here.
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