Flex Your Beneficiaries: Reducing the Income Tax Burden on Non Grantor Trusts

May 15, 2022

Many trusts are “grantor trusts” for income tax purposes during the trust creator’s lifetime, allowing trust income to be taxed to the trust creator, rather than to the trust itself. Because trust tax brackets are much more compressed than individual brackets (reaching the highest marginal tax rates with a very small amount of income), grantor trusts usually result in lower overall income taxation. However, in some cases, a non-grantor trust may be preferable. And in any event, grantor trust status will end once the trust creator dies. A non-grantor trust must either pay its own income tax or, if it has made distributions to beneficiaries that carry out trust income, tax on that income will be paid by the beneficiaries. Just like income tax paid by the trust’s creator, income tax paid by trust beneficiaries will generally be lower than that paid by the trust itself. However, that usually requires distributing trust property out to those beneficiaries, where it loses the protection of being in trust. In this webinar, the speakers will discuss when non-grantor trusts may be a better option and propose a new way to structure and administer non-grantor trusts. This strategy should significantly reduce overall income tax on trust income – by taking advantage of those lower taxes if income is carried out to individual beneficiaries – but without losing the trust’s asset protection. We will discuss specific types of “flexible” trust beneficiaries, and how distributions to those beneficiaries and related entities can provide these results.   Speakers: Douglas J. Blattmachr, M.B.A., Jonathan Blattmachr, J.D., Elizabeth Q. Boehmcke, Esq., Martin M. Shenkman, Esq.   Sponsor: Peak Trust Company and Interactive Legal (ILS)   * There are no professional advancement credits (CPE, CLE, etc.) offered for viewing this webinar. *This may constitute attorney advertising.