Let me use this scenario: You are highly blessed but all of a sudden you have a large sum of money in your checking account. Living on a frazzled shoestring before receiving the funds, you do not have a trust or an LLC. What, if any, are the tax implications of moving personal funds into a legal entity? Do you pay pay a gifting tax for moving these funds out of your name into a trust (LLC, etc.).
Thank you so kindly for your direction an clarification.
Funding a trust and gifting money or other assets are not the same. A gift can have certain tax implications depending on the form and amount of the gift.
When you establish a revocable trust, you can then "fund" the trust by putting all assets under the trust (accounts, real property, personal property, so on).
It is unclear if you are asking about estate planning or specific asset protection issues. If you want to establish a trust and fund it, that does not create any tax liability (if done correctly). If you are looking to protect the assets from attack by possible creditors, that is separate and is done through revocable, spendthrift, and other trusts and mechanisms. As a general matter there are no particular tax implications in that, but plenty of legal ones.
In short, you should speak with a local attorney with expertise in estate and asset planning. It is extremely complex area of law and something that requires an expert.
This answer is for informational purposes only and is not legal advice regarding your question and does not establish an attorney-client relationship.
If the trust is a revocable trust, then there are no gift tax implications on transferring assets to it.
If you fund an irrevocable trust there are gift tax implications. In the latter situation, gifts to trusts are usually future interest gifts to the recipients. As a result they do not qualify for the annual donee exclusion of $13,000 unless you have certain provisions contained in the trust.
If you need more insight into this topic please read Gift Giving: Tax Advantages at the following link http://www.sjfpc.com/gift_taxes_planning.html
You should really speak to an estates attorney about estate planning. For more on these and other issues, see Estate Planning Mistakes: 5 Not So Easy Pieces at http://www.sjfpc.com/estate_planning_drafting_wills_trusts.html
Hope this helps.
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Are you worried about protecting the assets? If so you can set up a spendthrift trust BEFORE you get into liability trouble.
You really need to sit down with a tax attorney/estates attorney are articulate what you are trying to accomplish.
I have not seen any objectives / desires in your question. For example money placed in a grantor trust is treated as if you didn't transfer it at all from a tax standpoint.
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Curt Harrington Patent & Tax Law Attorney Certified Tax Specialist by the California Board of Legal Specialization PATENTAX.COM This communication is general information and not legal advice, and does not create an attorney-client relationship. This communication should not be relied upon as any type of legal advice. Please note that no attorney-client relationship exists between the sender and the recipient of this message in the absence of either (1) a signed fee contract and (2) remission of an agreed-upon retainer. Absent such an agreement and retainer, I am not engaged by you as an attorney, nor is any other member of my law firm.
Estate Planning Attorney
You are really talking about two different situations.
If you contribute assets to a business entity - an LLC, a corporation, or a limited partnership - you receive a membership interest, stock, or partnership interest in return. So there is no gift tax implications per se. The entity owns the assets, and you own the interest in the entity.
A trust (in Texas) is not an entity, but a special type of legal relationship. If you transfer money or other assets to a trustee and the terms of the trust are not revocable or amendable by you, then generally speaking, you will have made a gift for the benefit of the beneficiaries which may be subject to gift tax. That said, in 2012, you can give away up to $5,120,000 in assets during your lifetime without any gift tax liability (although you may have to file a gift tax return).
If you are already expecting to receive a large sum of money, at this point, it is unlikely that it will matter - for tax purposes - whether you receive the money individually or through a business entity or a trust at this point. Nonetheless, you should sit down with an attorney to discuss the circumstances and what specifically your are trying to achieve.
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