What are the tax implications for a person who establishes an individual trust account?
Income Tax: Because the beneficiary is the donor of a self-settled trust, the beneficiary will be required to pay federal income tax on earnings generated by the individual trust account. Gift Tax: Because the beneficiary is the donor of a self-settled trust, the beneficiary will not be subject to gift tax on contributions to the beneficiarys individual trust account. Tax Deductions: A contribution to an individual trust account is not deductible as a charitable contribution because the funds directly benefit a specific individual.
