David J. Edwards - Page 63







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                            FINANCIAL FLOW OF COMMON- LAW TRUST SYSTEMS                                                         
                             IRREVOCABLE, DISCRETIONARY, COMPLEX TRUSTS                                                         
                                          TRUST INCOME & EXPENSE FLOW                                                           
                                                  DAVID EDWARDS, M.D.                                                           

                             CLAW,                                                                                              
                             SCOTT,                                                                                             
                            SIERRA,                                                                                             
                            MALPASO          CLAW             LAP                       TAKE FIVE           SOL                 
           Trust          Upstreaming    Upstreaming     Personal        Investment    Other Real     Focus                     
           Function       Trust-         Trust-          Residence       Trust         Estate         Trust                     
                          Equipment.     Service &       Trust                         Trust                                    
                          (Automobile)   Supplies                                                                               
           Income         Rent or        Payments        Rent from       Sale          Rest or        K-1 Dividends             
                          Lease          for services    other Trusts,   Proceeds      Lease          from other                
                          Contracts w/   or supplies     Corporations,   Interest      Sale           Trusts,                   
                          business       Accounts        Tenants,        Dividends     proceeds                                 
                                         Receivables     or Businesses                                                          
           Expenses       Lease or       Purchase of     Normal          Purchase of   Advertising    Normal                    
                          Contract       supplies,       Mortgage        Investments   Mortgage       Charitable                
                          payments.      Account         Taxes           Dividend to   Taxes          Contributions             
                          Expenses to    Receivables,    Maintenance     Focus Trust   Maintenance    K-1 Dividends             
                          maintain       Inventory at    Insurance                     Improvements   to Beneficiary            
                          equipment      standard,       Supplies                      Insurance      Educational               
                          Gas            resell at       Depreciation                  Supplies       expenses,                 
                          Supplies       Profit          Repairs                       Depreciation   Medical                   
                          Repairs        Dividend to     Utilities                     Repairs        Insurance                 
                          Rent to        Focus Trust     Add ons                       Utilities      Medical                   
                          other trusts                   Improvements                  Add ons        payments,                 
                          Dividend to                    Furniture                     Improvements                             
                          Focus Trust                    Dividend to                   Furniture      Abnormal                  
                                                         Focus Trust                   Fixtures       Life Insurance            
                                                                                       Dividend to    premiums                  
                                                         Abnormal                      Focus Trust                              
                                                         T.V.                                                                   
                                                         Newspaper                                                              
                                                         Phone                                                                  
           Assets held    Equipment      Contracts       Residence       Stocks,       Property       UBIs in other             
                                                                         etc.                         Trusts                    
           Depreciation   Equipment      None            Residence       None          Property       none                      
                                                         Furniture                                                              

          Prior to the end of the calendar (tax) year, a Trust can reduce its taxable                                           
          income by paying Trustee Fees (1099) or wages to employees (W-2). A Trust can                                         
          also make unlimited charitable contributions with a write-off of up to 100%                                           
          of the Trust income. If there is still taxable income remaining in your trust                                         
          after calendar year end, a Trust has until March 5th (65 days) to make                                                
          distributions to the      Beneficiaries and further reduce or eliminate Trust                                         
          income. Distributions are made on a Fiduciary K-1 form to one or more of the                                          
          Beneficiaries. If the taxable income stays in the Trust, then it will be                                              
          taxed at the Trust's tax rate which increases very rapidly. However, unlike                                           
          people, a Trust is only taxed on income it actually keeps (doesn't                                                    
          distribute), not on net income earned.                                                                                










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Last modified: May 25, 2011