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Gifting Inheritance

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  • #31
    Grantor (person originating the assets) goes away in an irrevocable trust. It's a one way street. In a revocable, the grantor remains in control until xx time the trust dictates (typically upon grantor's death).

    The beneficiary typically has no control over the trust. The named trustee has that control and follows whatever the grantor's stipulations laid forth in the trust. This is how the beneficiary is protected from outside parties trying to lay claim/influence on drawing assets inappropriately.

    In this case, you can use EITHER a revocable or irrevocable trust with these funds.

    Given your attorney isn't keen on passing it directly to them and Anne's very good comments -- you may want to put into a revocable trust (yours or a completely separate one if you wish). If irrevocable - you're paying top dollar taxes for earnings.

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    • #32
      Originally posted by StarTrekDoc View Post
      Grantor (person originating the assets) goes away in an irrevocable trust. It's a one way street. In a revocable, the grantor remains in control until xx time the trust dictates (typically upon grantor's death).

      The beneficiary typically has no control over the trust. The named trustee has that control and follows whatever the grantor's stipulations laid forth in the trust. This is how the beneficiary is protected from outside parties trying to lay claim/influence on drawing assets inappropriately.

      In this case, you can use EITHER a revocable or irrevocable trust with these funds.

      Given your attorney isn't keen on passing it directly to them and Anne's very good comments -- you may want to put into a revocable trust (yours or a completely separate one if you wish). If irrevocable - you're paying top dollar taxes for earnings.
      The taxes would depend on how the money is invested and whether the earnings are distributed to the beneficiary. At current dividend rates, you could have several hundred thousand dollars in a trualst and not reach the top tax bracket.
      Depending on the circumstances, the trust could distribute to the beneficiary enough of the dividends to get the lowest combined tax rate between holding money in trust and paying it out.

      If you would be happy with the kid having the cash themselves, then it just becomes a matter of tax optimization. Distributing the money makes it part of the beneficiary's estate.

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      • #33
        Originally posted by StarTrekDoc View Post
        ). If irrevocable - you're paying top dollar taxes for earnings.
        IANAL but that is only true to the extent earnings are retained. If distributed they can be taxed at the trustee's rates.

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