Create minor’s trust to avoid major problems, kiddie tax — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Create minor’s trust to avoid major problems, kiddie tax

by on
in Small Business Tax,Small Business Tax Deduction Strategies

The “kiddie tax” isn’t just for kids anymore. Due to recent tax law changes, investment income earned by a child may continue to trigger the additional tax well into his or her 20s. This can put a damper on traditional college savings techniques for children.

Strategy: Establish a “minor’s trust,” also called a Section 2503(c) trust, for kids or grandkids. With this type of trust, all of the income is taxed directly to the trust. In other words, the kiddie tax never comes into play.

A minor’s trust has at least one distinct advantage over the better-known option of a custodial account. Reason: The trust can continue past the age of majority in the state where the family lives.

Therefore, there are no worries about children squandering the funds in their accounts. And, if you’re the trustee, you can still call the shots for the trust all the way to graduation day. It’s a win-win situation.

Benefits of a trust

Here’s the whole...(register to read more)

To read the rest of this article you must first register with your email address.

Email Address:

Leave a Comment