Living trusts & new tax law

[Silvery Moon]

So, we have a revocable living trust. Everything is titled in the name of the trust. We pay the taxes on the investment income, which is "passed through" to us. I'm sure we are far from the only folks here who have done this.

So, here's a thought for discussion: Should one consider forming an LLC and moving assets around from a titling perspective in an effort to capture the new tax rates and the 20% deduction on income? What kinds of things would likely be involved? Might it save more than the cost of setting everything up and leave one substantially better off than simply leaving everything as-is in a revocable living trust? If so, what are some of the issues or steps one would want to carefully consider before jumping into the LLC swimming pool?

 

[wolf]

Is your investment income, rental property? Or Equities?

 

[Silvery Moon]

Good point. In our case, investment income means equities, bonds, REIT funds, the occasional hedge fund, and the like. We also own our primary (and only) home outright.

 

[OldShooter]

It's been known for months that any pass-through provision would have very high potential for abuse. As a result, you can expect that the IRS will write a thicket of rules. IMO there is no point in trying to game the system before we see the rules of the game. It will not be easy, you can be sure of that.

 

[GrayHare]

AFAIK the 20% deduction applies only to earned income that is passed through. Investment income that passes through does not qualify for the 20% deduction.

 

[Silvery Moon]

It's been known for months that any pass-through provision would have very high potential for abuse. As a result, you can expect that the IRS will write a thicket of rules. IMO there is no point in trying to game the system before we see the rules of the game. It will not be easy, you can be sure of that.

Good point, not remotely interested in getting involved in something the IRS goes after vs. something they consider correct and that passes their muster.

 

[wolf]

Another "Thread", said Rental Income qualifies. Again, agree with Oldshooter. Will have to wait and see actual rule next year.