Annual Gift tax exclusion


K

kastnna

If a single grantor wishes to make his maximum annual gift
to a trust that has two beneficiaries what is the maximum he
can currently gift (ignore the lifetime excusion amount for
now)?

Is it $12,000 (1 entity/Trust) or $24,000 ($12k x 2
beneficiaries)?
 
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H

Herb Smith

kastnna said:
If a single grantor wishes to make his maximum annual gift
to a trust that has two beneficiaries what is the maximum he
can currently gift (ignore the lifetime excusion amount for
now)?

Is it $12,000 (1 entity/Trust) or $24,000 ($12k x 2
beneficiaries)?
I believe it is $0, as gifts to a trust are NOT gifts to a
natural person. A gift tax return (709) would be required
for any amount "gifted" to the trust; no annual exclusion
would apply.
 
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S

Stuart A. Bronstein

kastnna said:
If a single grantor wishes to make his maximum annual gift
to a trust that has two beneficiaries what is the maximum he
can currently gift (ignore the lifetime excusion amount for
now)?

Is it $12,000 (1 entity/Trust) or $24,000 ($12k x 2
beneficiaries)?
Unless the trusts are set up for this precise purpose, gifts
to trusts are not eligible for the exemption. So the answer
is likely to be $0.

Stu
 
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K

kastnna

Sorry for the lack of clarity. I am referring to Irrevocable
Life Insurance Trusts (ILITs) that have a "Crummey
Provision" in them. The usual process is that the grantor
makes a gift to the trust for the beneficiary. A crummey
letter(s) is sent offering the beneficiaries the gift. The
benes decline the offer and the gift is used to pay an
insurance premium.
 
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S

Stuart A. Bronstein

kastnna said:
Sorry for the lack of clarity. I am referring to Irrevocable
Life Insurance Trusts (ILITs) that have a "Crummey
Provision" in them. The usual process is that the grantor
makes a gift to the trust for the beneficiary. A crummey
letter(s) is sent offering the beneficiaries the gift. The
benes decline the offer and the gift is used to pay an
insurance premium.
Ok, thanks for the clarification.

Depending on how the trust is drafted, for a Crummey trust
with two beneficiaries the exempt amount could be $24,000,
but it could also be $5,000 or $10,000.

The reason is that the beneficiaries' failures to withdraw
the gifts within the time provided are considered taxable
gifts if they exceed either $5,000 or 5% of the assets out
of which the money could have been taken.

In general if the trust is drafted so that anything in the
trust will belong to those particular beneficiaries in any
event (e.g. will go to their estates if they die or they can
designate who the money goes to under some circumstances),
the gifts will be considered to be from the beneficiaries to
themselves, which is not a taxable event.

But if there are any restrictions - they can't designate who
gets the property when they die or if they have a special
power of appointment rather than a general one - they are
not considered the ultimate beneficiaries, and the limit is
$5,000 each, or perhaps for the two, depending on how the
trust is drafted.

Stu
 
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