Video: Trusts vs. Estates

In this lesson, unravel the nuances that distinguish trusts from estates, presenting a clear and practical comparison of these legal entities. Nick Palazzolo, CPA, delves into their purposes, creation, administration, duration, taxation, and privacy aspects, offering clarity on the operational differences. He sheds light on the roles of trustees and executors, demystifying the often-confused concepts with everyday examples and relatable analogies. Additionally, Nick provides insight into the evolution of these entities' coverage on the exam, noting their reduced emphasis over time, assuring a focus on the essential information needed to understand the current exam requirements.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Let's talk about trusts versus estates. We've got two concepts on the exam. Now, historically, these are a lot less important than they used to be. When I took the exam back in 2018, these were a lot more prevalent. Concepts such as distributable net income and something like that. You'd have to do a lot more calculations. Estates have been significantly slashed. The amount of you need to know about trusts have been slashed and obviously recovering what you need to know. But yeah, let's kind of just talk about the difference because not aware there is a difference. Trusts and estates are both legal entities that can hold property and assets for the benefit of individuals or organizations. However, there are going to be some important distinguishing factors between both. Well, first, creating them. Trusts are going to typically be created during the lifetime of the trustor, the person who creates the trust, whereas estates are created upon the death of an individual. So if you didn't create a trust, what happens to all of your assets, all of your cars and houses and everything, all of those, your gold, your jewelry? Well, guess what? That goes to the estate. That is your estate, the estate of John Smith, who passed away. Purpose. Trusts are established for a specific purpose, such as providing the education of a child, managing the money until the child's of age, managing property for a beneficiary. Maybe you just don't know what to do with your money, right? So you put it in a trust and you have someone run that trust and basically financial management does do it all for you. Now, estates are established to settle the affairs of a deceased individual and distribute their assets according to their will or

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Trusts, Estates, Gift Tax, & Tax-Exempt Organizations

Module: 4 Concepts, 35 Videos

Gift Tax and Estates Overview

1:49

Introduction to Gift Tax and Estates

1:52

General Points Regarding Gift Tax

8:57

Complete and Incomplete Gifts