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URL:  https://boards.fool.com/by-pass-trusts-and-income-taxes-17022617.aspx

Subject:  By-pass Trusts and Income Taxes Date:  4/7/2002  5:58 PM
Author:  Lokicious Number:  60069 of 129521

I'm trying to figure out, if my wife inherits money through a by-pass trust, whether that will affect our income taxes during the period between the death of one parent and the death of the second.

My little understanding of these trusts is that, to optimize inheritance tax exemptions, a trust is set up in such a way that when one of her parents dies, my wife "inherits," but actually the second parent has full use of the trust during his or her lifetime. I also understand that the trust pays taxes on income generated by the trust.

But does that income from the trust count towards our income, even though my wife can't use it? What about after both parents die, if the money remains in a trust, or trusts?

Thanks.
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