Irrevocable Trusts

Many of these revocable trusts have a trigger in them causing the trust to become permanent. The most common trigger is the death of the grantor. Others include permanent disability or lack of capacity on the grantor to make decisions. Once the trigger is engaged, the trust goes into action. It then becomes unchangeable or permanent in nature and is called an Irrevocable Trust.

Forms of Business Ownership

When an entrepreneur starts out on his long journey of building a legacy with his business; he almost immediately focuses on the legal status of his business.   His thoughts include:  ‘Should I become a limited liability company or an S-Corporation?’;   ‘What if I take on partners?’; ‘How do I get more capital without giving up …

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Phantom Income

Phantom Income

Those small businesses using partnership or S-Corporation formats issue Form K-1 to the respective owners.  When income is assigned to the owner and there is no corresponding cash related to that income, then this income is referred to as ‘Phantom Income’.  In effect, it is assigned income for tax purposes without the corresponding cash to …

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Dividends and Distributions –Use in the Proper Context

Dividends and distributions refer to the payment of cash to investors.  So why two separate terms?  Well, the term is tied back to the type of entity that makes the payment.  Simply stated, regular corporations, i.e. C-Corporations as identified in the Internal Revenue Code use the term ‘Dividends’ and S-Corporations (Small Business Corporations) use the …

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Form 1041 – Income Tax Return for Estates

When an individual passes away, his/her will or trust identifies a representative to administer his/her estate.  This representative is referred to as the executor (male) or executrix (female) and is generally approved or assigned by the local circuit court.  The Internal Revenue Service tasks this representative to file a final personal return and information returns …

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What is a K-1?

A K-1 is a reporting tool to the Internal Revenue Service.  It is used by Partnerships, S-Corporations and Trusts to report the taxpayer’s share of income, deductions, and credits.  A K-1 is similar to Form W-2 or 1099 in that the information provided informs the taxpayer of what has been reported to the Internal Revenue …

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What are Trusts?

A trust is an agreement for one party to care for the assets of another party for the benefit of a third party.  In essence, it is a business agreement.  The person creating or the original owner of the assets is referred to as the Grantor.  The party that will take care of the assets …

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