Submitted By: Nicholas
Answered: October 15, 2013 8:30 am

If I set up a revocable trust and fund it with income-producing securities, does this lower my adjusted gross income?

Probably not. A revocable trust of which you are a trustee and beneficiary is a grantor trust. You are taxed on the income from this trust to the same extent that you would be if there were no trust. The trust doesn’t even need its own taxpayer identification number; your Social Security number can be used for the trust. Bottom line: Revocable trusts for the most part are not income tax saving devices.

Tax Glossary

Individual retirement account (IRA)

A retirement account to which up to $4,000 (or $5,000 if you are 50 or over) may be contributed for 2007, but deductions for the contribution are restricted if you are covered by a company retirement plan. Earnings accumulate tax free.

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