Trusts have historically been used for a variety of reasons: to benefit family members, charities, or even pets. They can be "permanent" by making them irrevocable, or they can be changed or terminated at the option of the grantor by making them revocable. They can be set up during life (inter vivos trusts) or at death (testamentary trusts).
Unless trusts are considered to be grantor trusts where income is taxed directly to the grantor, trusts are separate taxpayers, filing their own returns (Form 1041) annually and paying taxes at their own rates on amounts not distributed to beneficiaries. Due to new law changes effective in 2013, several of the tax rules for trusts have changed. Here are the new income tax rules to note.
Ordinary Income Tax Rates
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