Terry Is Considering Transferring Assets Valued at $400,000 to an Irrevocable

question 5

Essay

Terry is considering transferring assets valued at $400,000 to an irrevocable trust for the benefit of her son, Cliff, age 15, with First National Bank as trustee. Her attorney has drafted a trust agreement that provides that Cliff is to receive income at the trustee's discretion for the next 20 years and that at age 35, the trust assets will be distributed equally between Cliff and his sister Joanna. Terry anticipates that her husband will consent to gift splitting. What tax issues should Terry and her husband consider with respect to the trust she is creating?

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Definitions:

Existential Philosophy

A branch of philosophy concerned with the analysis of existence and the way humans find themselves existing in the world. It emphasizes individual freedom, choice, and responsibility.

Trait Approach

A perspective in psychology that focuses on identifying, describing, and measuring individual differences in personality based on stable traits.

Behaviorism

A school of psychology that focuses on observable behaviors and the ways in which they're learned, rather than on emotions or thoughts.

Carl Rogers

An influential American psychologist who founded the humanistic approach to psychology, emphasizing the importance of the self and the potential for personal growth.