A trust account is an account where funds are held to achieve a specific purpose, such as paying for a specific bill or issuing money in installments to a person or a place. Trust account holders are usually called trustees, while trust recipients are called trust beneficiaries.Continue Reading
Some trust accounts are set up by people to dispense certain amounts of monies to loved ones over the course of their lives. For example, some people set up trust accounts that issue funds to their children or other dependents each month in the event of their deaths. These trust accounts are usually overseen by banking brokers who take a monthly or yearly percentage of the trust to issue the funds each month on behalf of the person that set up the trust.
Another type of common trust account is property tax trust accounts. These accounts are usually set up by real estate entrepreneurs that own multiple properties. Instead of keeping up with property tax monies on their own, these people set up trust accounts to fund the taxes so that they do not lose their investment properties due to non-payment of taxes.
It is important to note that trust accounts offer certain monetary benefits, such as immunity from estate taxes upon the death of the person that set up the trust account.Learn more about Financial Planning
When account holders withdraw funds from 401k accounts after reaching retirement age, the money is subject to normal income tax rates, according to the IRS. There is a 10 percent tax penalty for removing money from 401k accounts early, but a number of exceptions to the 10 percent rule exist.Full Answer >
Employees who leave federal service can withdraw money from their Thrift Savings Plan or roll over the funds to an IRA or an employee-sponsored retirement plan once the new account is active. Employees may have to pay taxes and penalties on withdrawals and transfers, depending on their age and the types of their investments, according to TSP.gov.Full Answer >
Used to calculate a person's required minimum distribution of funds, an individual retirement account uniform lifetime table reports the life expectancy factor and the account owner's age, according to American Funds. Overall, the uniform lifetime table is used to help individuals manage their IRA funds and budget for future distribution.Full Answer >
The Internal Revenue Service, or IRS, requires that a person who inherits an individual retirement account, or IRA, takes out a minimum distribution amount each year based on the beneficiary's life expectancy or withdraws all the funds within 5 years of the original owner's death, states Vanguard. The latter option is not subject to the required minimum distribution rule while those using the first option have to withdraw the minimum annually to avoid tax penalties.Full Answer >