Which of the following purposes would constitute a legal use for a trust?Question 1Select one:a.None of the other optionsb.A deliberate attempt to evade your tax obligationsc.Income-splittingd.To hide money gained from illegal activities
Question
Which of the following purposes would constitute a legal use for a trust?Question 1Select one:a.None of the other optionsb.A deliberate attempt to evade your tax obligationsc.Income-splittingd.To hide money gained from illegal activities
Solution
The correct answer is c. Income-splitting. This is a legal use for a trust. Trusts can be used for a variety of purposes such as managing assets, protecting assets, and income splitting. Income splitting is a method used to divide income in a way that lowers overall taxes. It is often used by families where one member earns a significantly higher income than the others.
Option a. None of the other options is incorrect because income-splitting is a legal use of a trust.
Option b. A deliberate attempt to evade your tax obligations is illegal. Using a trust to evade taxes is considered tax fraud and is punishable by law.
Option d. To hide money gained from illegal activities is also illegal. This is considered money laundering, which is a criminal act.
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