Which of the following is the most accurate statement concerning the use of trusts in tax planning?
A)The grantor trust rules allow grantors to shift income into trusts and reduce their own taxes.
B)Nontax reasons for the use of trusts (such as avoidance of probate)typically outweigh tax reasons for creating trusts today.
C)The large 15% tax bracket available to trusts allows complex trusts to be used as an income-shifting device.
D)None of the above statements are correct.

Question

Quizplus · Accepted Answer

While trusts can have tax benefits, such as the ability to avoid estate taxes, in recent years nontax reasons for using trusts have become more significant, such as avoiding probate and protecting assets from creditors. Furthermore, the grantor trust rules actually require the grantor to pay taxes on any income generated by the trust, so option A is not accurate. Option C is also not accurate as the 15% tax bracket for trusts is limited and does not necessarily make complex trusts a favorable income-shifting device.

Which of the Following Is the Most Accurate Statement Concerning