By: Martin M. Shenkman, CPA, MBA, JD
Parents have the legal obligation to support their children under state law. While the rules differ from state to state, child support obligations generally apply to children under the age of majority, but some states continue certain obligations, such as the payment of education, beyond that point. Child support obligations can have both civil and criminal penalties if they are not met. While generally thought of only in the context of divorce, your legal obligation to support a child can have significant impact in the design, planning and implementation of a trust, and the tax consequences of a trust. If you are the trustee of a trust and can use the trust assets to pay your child's medical and education costs, those payments may constitute the discharge or your legal obligation to support your child and may trigger adverse tax results. This could cause the income of the trust to be taxed in whole or part to you, and the assets of the trust to be taxed in whole or in part to your estate.
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