An estate or trust is a type of tax entity. A trust is created by an individual person to protect, transfer or to preserve the person’s assets, and to distribute income to beneficiaries. A trust may take effect during the person’s life, or might take effect upon the person’s death. A trust is managed by a trustee. The trustee is responsible for all aspects of the trust. The trust is a separate entity for tax purposes from the person who created the trust.
Estates are entities that report income after an individual person has died. If the estate of a deceased person, for example, earns interest, dividends, or capital gains after his or her death, then that income is consider income for his or her estate, and the income must be reported. Estates may also have to pay tax on the total value of assets if the estate is valued at more than the exemption amount. The estate tax is a tax on assets, whereas the estate income tax is a tax on income.
Our tax professionals are available to discuss your trust and estate income tax filing and preparation needs.