What are the tax implications of cost-of-living trusts?

What are the tax implications of cost-of-living trusts?

Cost-of-living trusts can have various tax implications, including potential income tax on distributions and estate tax considerations. Would you like to know more about specific tax benefits or drawbacks?

Yes, what are the specific tax benefits?

One key benefit is that assets in a cost-of-living trust may not be subject to estate taxes, depending on how the trust is structured. Additionally, income generated by the trust may be taxed at a lower rate.

Are there any drawbacks I should be aware of?

Yes, drawbacks can include the complexity of managing the trust and potential income tax on distributions to beneficiaries. It's important to consult a tax advisor.

How do I set up a cost-of-living trust?

Setting up a cost-of-living trust typically involves drafting a trust document, funding the trust with assets, and appointing a trustee. It's advisable to work with an attorney experienced in estate planning.