Income Tax Treatment of Living Trusts
During one’s lifetime, revocable trusts do not provide any income tax savings, For tax purposes, the trusts are treated as if they do not exist. A revocable trust is known, for tax purposes, as a Grantor Trust. A grantor trust is not a taxpaying entity. No annual tax is required to be filed. Instead, all income and loss of the trust is reported on the tax returns of the husband and wife.