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    Estates and Trusts

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    Estates and trusts are taxed similarly to individuals. The taxable income of an estate or trust is computed the same way as an individual. An estate refers to all properties, rights and obligations of a deceased person. A trust is an agreement where title to property is passed to another for investment, with income and corpus distributed according to the creator's directives. Taxable estates are those under judicial settlement from the time of death. Taxable trusts must be irrevocable, meaning the terms cannot be changed. Illustrations provide examples of computing taxable income for estates and trusts.

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    Estates and Trusts

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    heyhey
    98 views6 pages
    Estates and trusts are taxed similarly to individuals. The taxable income of an estate or trust is computed the same way as an individual. An estate refers to all properties, rights and obligations of a deceased person. A trust is an agreement where title to property is passed to another for investment, with income and corpus distributed according to the creator's directives. Taxable estates are those under judicial settlement from the time of death. Taxable trusts must be irrevocable, meaning the terms cannot be changed. Illustrations provide examples of computing taxable income for estates and trusts.

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    Taxation 2

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    Estates and trusts are taxed similarly to individuals. The taxable income of an estate or trust is computed the same way as an individual. An estate refers to all properties, rights and obligations of a deceased person. A trust is an agreement where title to property is passed to another for investment, with income and corpus distributed according to the creator's directives. Taxable estates are those under judicial settlement from the time of death. Taxable trusts must be irrevocable, meaning the terms cannot be changed. Illustrations provide examples of computing taxable income for estates and trusts.

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    98 views6 pages

    Estates and Trusts

    Uploaded by

    heyhey
    Estates and trusts are taxed similarly to individuals. The taxable income of an estate or trust is computed the same way as an individual. An estate refers to all properties, rights and obligations of a deceased person. A trust is an agreement where title to property is passed to another for investment, with income and corpus distributed according to the creator's directives. Taxable estates are those under judicial settlement from the time of death. Taxable trusts must be irrevocable, meaning the terms cannot be changed. Illustrations provide examples of computing taxable income for estates and trusts.

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    Estates and Trusts

    The rules in taxation of individuals


    generally apply to estates and trusts. The
    taxable income of an estate or trust shall
    be computed in the same manner and on
    the same basis as in the case of an
    individual.
    Estate or Inheritance – refers to all the properties, rights and obligations
    of a person which are not extinguished by his death and also those
    which have accrued thereto since the opening of the succession.

    Trust – is an agreement created by will or an agreement under which


    title to property is passed to another for conservation or investment
    with the income therefrom and ultimately the corpus or principal to be
    distributed in accordance with the directives of the creator as
    expressed in the governing instrument.

    Trustor or grantor – is the person who establishes the trust

    Beneficiary – is the person for whose benefit the trust has been created.

    Fiduciary – is the general term which applies to all persons or


    corporations that occupy positions of peculiar confidence towards
    others, such as trustees, executors, guardians, or administrators,
    receivers, or conservators
    Taxable Estates
    - are estates of deceased persons under judicial
    settlement. Taxation of an estate begins from the
    time of death. Hence, any income received after the
    death shall form part of the income of the estate.

    Taxable trusts
    - for a trust to be taxable, it must be irrevocable,
    meaning it cannot be changed by recall or
    cancellation, both as to corpus or principal and
    income.

    In a revocable trust where title to income may be


    revested in the grantor, the trust itself is not subject
    to income tax. It is the grantor who is taxable.
    Illustrations:
    1. Ms Red died on Aug. 14, 2012. The estate had P
    1,500,000 gross income and expenses to this
    income was P 400,000. There was no distribution of
    income among the heirs. On 2013, the gross
    income of the estate is P 2,000,000 with expenses
    of P 1,200,000.
    2. Mr. Argos created an irrevocable trust designating
    his two daughters, aged 3 and 1 as beneficiaries.
    Under the terms of the trust; only half of the
    income shall be distributed to the beneficiaries. The
    other half shall be left to accumulate and be
    distributed when the beneficiaries reach 21 years of
    age. For the year, income of the trust was P
    500,000.
    Two or more Trusts

    1. Mr. Anilov maintains two irrevocable trusts


    that name his three children, all minors, as
    common beneficiaries. The terms of the
    trusts provide that no income shall be
    distributed to the beneficiaries until the
    youngest should become 25 years of age.

    Trust 1 Trust 2
    Gross income P 450,000 P 600,000
    Deductions 150,000 200,000

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