Clifford Trust

DEFINITION of 'Clifford Trust'

Clifford Trusts allow grantors to transfer assets that produce income into the trust and then reclaim them when the trust expires. These trusts cannot last for a term of less than 10 years plus one day. Clifford Trusts were once commonly used as an effective and legal means of avoiding large tax expenses; the grantor would shift his assets to a trust which would then later be claimed by a recipient who would ideally be subject to a lower marginal tax rate.

BREAKING DOWN 'Clifford Trust'

Prior to the Tax Reform Act of 1986, Clifford Trusts were often used to shift assets that produced income to children from their parents. However, this legislation rendered this strategy impractical, as the Act mandated that Clifford Trust income must be taxed to the grantor. Therefore few of these trusts have been created since then.

RELATED TERMS
  1. 529 Plan

    529 is a category of plans that provide tax advantages when saving ...
  2. Guardian IRA

    An IRA held in the name of a legal guardian or parent on behalf ...
  3. Uniform Transfers To Minors Act ...

    An act that allows a minor to receive gifts such as money, patents, ...
  4. Uniform Gifts to Minors Act - UGMA

    An act that allows minors to own property such as securities. ...
  5. Marginal Tax Rate

    The amount of tax paid on an additional dollar of income. The ...
  6. Tax Bracket

    The rate at which an individual is taxed. Tax brackets are set ...
Related Articles
  1. Savings

    Choosing The Right 529 Education Savings Plan

    Before you fund one of these education-savings vehicles, be sure you know their differences.
  2. Taxes

    Clearing Up Tax Confusion For College Savings Accounts

    Put your kids through school without being hounded by the tax man.
  3. Savings

    College Savings Accounts: U.S. Vs. Canada

    Saving for your child's education is an important commitment. Find out what help is available to you in the U.S. and Canada.
  4. Options & Futures

    Invest In Your Education With An RESP

    All Canadians should know the benefits of these flexible education savings plans.
  5. Personal Finance

    The Top 6 Books for Estate Planning

    Here are six outstanding books that can help you with your estate planning.
  6. Estate Planning

    Estate Planning: 16 Things To Do Before You Die

    If you don’t plan your estate, your surviving family may have to deal with disputes and probate that were avoidable.
  7. Your Practice

    Advisors: $240B in Fees Up for Grabs by 2030

    Advisors have an opportunity to win generational assets over the next 15 years. Here are some tips on how to cater to different demographics.
  8. Personal Finance

    Want Your Will to Prevail? Don't Die Intestate

    If you die without making a last will and testament, you are said to have died intestate. What happens to your assets in this case?
  9. Your Clients

    When to Trust a Revocable Trust

    Unsure of how your assets will be dispersed once you're gone? Here's how setting up a revocable trust while you're here can be a big benefit.
  10. Retirement

    Your Retirement-Planning Team

    As you accumulate wealth, retirement planning can be too complex for just one person. The right team can help you avoid headaches and reach your goals.
RELATED FAQS
  1. Are estate planning fees tax deductible?

    Estate planning fees may be tax deductible, but only if certain conditions have been met. Internal Revenue Service (IRS) ... Read Full Answer >>
  2. Can personal loans be included in bankruptcy?

    Personal loans from friends, family and employers fall under common categories of debt that can be discharged in the case ... Read Full Answer >>
  3. How much money does Texas make from unclaimed property each year?

    In 2014, the office of the Texas Comptroller of Public Accounts reported $234 million in unclaimed property claimant liabilities, ... Read Full Answer >>
  4. How much money does Michigan make from unclaimed property each year?

    According to the 2013-2014 Annual Report of the State Treasurer, the state of Michigan earned only $82,875 in abandoned and ... Read Full Answer >>
  5. Who decides if a financial security should be escheated?

    There is no one entity who "decides" to escheat assets. Rather, financial institutions are required to report inactive accounts ... Read Full Answer >>
  6. Will 529A plans replace special needs trusts?

    529 ABLE plans, also known as 529A plans, are state-sponsored accounts authorized by Congress that allow people with disabilities ... Read Full Answer >>
Hot Definitions
  1. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  2. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
Trading Center