Trust taxation

Trust taxation refers to how income generated by a trust is taxed. A trust is a legal arrangement where a trustee holds assets for beneficiaries. The trust itself can pay taxes on income it retains, often at compressed rates, or it can distribute income to beneficiaries, who then pay taxes on it at their individual rates. This structure ensures income is taxed at appropriate levels and helps manage estate planning, asset transfer, or privacy. The specific tax rules depend on the trust type and jurisdiction, but generally, trusts act as separate taxable entities or pass income through to beneficiaries.