IRREVOCABLE TRUST
There are
many kinds of Irrevocable Trusts established for various tax and estate
planning reasons, including Revocable Living Trusts which become irrevocable at
death. Most Irrevocable Trusts must file
a tax return and maintain proper accounting records. Your attorney may have been correct when he
explained that your trust was “Income Tax Neutral”; however, an informational
tax return is often still required.
Furthermore, to protect the integrity of the estate tax plan, accounting
records should be maintained.
You may be familiar with the business concept of “piercing the corporate veil.” The IRS can also pierce your trust veil with poisonous darts which we call “taxes”. No matter how many pounds of trust documents you have, or how much you paid the attorney to move assets out of your estate, the IRS may still find a way to tax those assets if you have not maintained accounting records and respected the provisions of the trust documents.
You may be familiar with the business concept of “piercing the corporate veil.” The IRS can also pierce your trust veil with poisonous darts which we call “taxes”. No matter how many pounds of trust documents you have, or how much you paid the attorney to move assets out of your estate, the IRS may still find a way to tax those assets if you have not maintained accounting records and respected the provisions of the trust documents.