What are the considerations in establishing an irrevocable trust for the benefit of ones children or grandchildren?
An individual may be interested in creating an irrevocable trust for the benefit of minors. As an alternative to a Crummey trust, the two trusts specifically designed for minors under the Internal Revenue Code and their features are shown in Exhibit 3. The following income tax rules apply to these trusts in 1998: * For income retained by and taxed to the trust, the following rates apply: $0-$1,700 15% $1,701-$4,000 28% $4,001-$6,100 31% $6,101-$8,350 36% Over $8,351 39.6% Because of these brackets, accumulating income in trusts [such as in the 2503(c) trust] is no longer recommended. * To the extent income is taxable to the child based upon distributions received pursuant to the terms of the trust, the rules for unearned income of a child under age 14 are applicable. * Assets sold by the trust within two years of receipt will have their gain taxed to the donor of the property. Business owners may want to consider funding these trusts for minors with assets to be used in the business (e
