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:

Policymakers

Individuals or members of government bodies responsible for creating and implementing laws and policies.

Legitimate Purposes

Valid or acceptable reasons or objectives for a policy, action, or law as recognized by a governing body or morality.

Tit-For-Tat

A strategy in game theory where a player responds to an opponent's action with equivalent action.

Repeated Game

A strategic situation where the same game (set of players, strategies, and payoffs) is played more than once, allowing for strategies to evolve based on prior outcomes.