Many people are interested in setting up a living trust and this can be a valuable estate planning tool. Many people are also curious about whether state and federal taxes would be due on earnings that are based on the assets inside the trust. Revocable living trusts are a powerful estate planning tool that are primarily used to avoid probate. 
Probate is the court process that follows someone’s death. Unlike many other kinds of trusts, revocable living trusts do not initiate special tax treatment. The individual is still considered the owner of the assets so that person would be responsible for reporting income and earnings on the individual tax return just as they did previously. Revocable living trusts, therefore, do not receive particular or special tax treatment. Revocable living trusts are designed to avoid the headaches and expenses associated with probate, not of the estate tax system in and of itself.
Living trusts could have various provisions that could be used to minimize estate taxes such as language that initiates a bypass trust upon death but these are the same kinds of provisions that are often included in many different types of wills. To schedule a consultation with an estate planning attorney, take action today. There are many tools available to you to help you plan ahead for taxes.