Clifford Trust

AAA

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.

INVESTOPEDIA EXPLAINS '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

    A plan that allows for the prepayment of qualified higher education ...
  2. Guardian IRA

    An IRA held in the name of a legal guardian or parent on behalf ...
  3. Marginal Tax Rate

    The amount of tax paid on an additional dollar of income. The ...
  4. Uniform Gifts to Minors Act - UGMA

    An act that allows minors to own property such as securities. ...
  5. Uniform Transfers To Minors Act ...

    An act that allows a minor to receive gifts such as money, patents, ...
  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. What's a Trust Fund?
    Personal Finance

    What's a Trust Fund?

    A trust fund is a fund comprised of a variety of assets, established by a grantor, to provide financial security to an individual, most often a child or grandchild - or organizations, such as ...
  6. A new Supreme Court ruling has some financial advisors rushing to set up trusts to help protect inherited IRAs. Is that necessary?
    Investing Basics

    How Advisors Can Protect Inherited IRAs

    A new Supreme Court ruling has some financial advisors rushing to set up trusts to help protect inherited IRAs. Is that necessary?
  7. Retirement

    What's the difference between a financial advisor and a financial planner?

    Seeking professional advice from a financial advisor may involve asking for financial help from a certified financial planner, stockbroker or an accountant.
  8. Personal Finance

    Top 10 Money Mistakes New Parents Make

    Although having a child is an exciting and exhilarating experience, it is very easy to lose track of finance or make unwise decisions with money.
  9. Home & Auto

    Why Your Will Should Name Designated Beneficiaries

    Find out how to make the tough decisions when it comes to choosing who will receive your assets and how they will be paid out.
  10. Retirement

    Should You Convert Your IRA?

    Discover the factors you must weigh to make this decision.

You May Also Like

Hot Definitions
  1. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  2. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  3. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  4. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  5. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  6. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
Trading Center