Any person that is going to be a beneficiary of an irrevocable trust should be aware of certain tax issues. Whether an irrevocable trust will be subject to estate taxes after the trust maker or grantor passes away often depends on the terms of the trust and how it was created. An irrevocable trust is typically treated as a separate legal entity that is not part of the estate of the trust maker. It the trust creation is attended by a taxable gift then there might have to be a gift tax return which can have the consequence of reducing the estate tax exemption for the trust maker. This column also discusses some of the complexities involved with irrevocable life insurance trusts (ILITs). Beneficiaries should consult some of the resources provided in this column for more information on the tax issues that their irrevocable trust might face.
See Kyle E. Krull, Are there Any Tax Issues for Beneficiaries of Irrevocable Trusts to Consider?, Wealth Management, November 4, 2015.
Special thanks to Jim Hillhouse for bringing this article to my attention.
