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Posted by Angelo Campanella on July 14, 2008, 11:40 pm
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Gil Faver wrote:
> so, this three year rule is true even if you are not using a living
trust.
>
> Does the IRS actually check this? I can't imagine most such gifts are put
> back into the decedent's estate tax calculation.
Most certainly they do, and have done so for a long time. The Estate
tax IRS is breed unlike the conventional IRS you deal wth from year to
year. The leave no stone unturned. Likely, the payback per hour of their
labor is much higher than the annual stuff.
Angelo Campanella
>
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Posted by kastnna on February 22, 2008, 3:46 pm
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> Now, a gift TO an IRREVOCABLE trust likewise does not qualify for the
> annual exclusion. The reason is that this is considered to be a gift
> of a future interest, and that kind of gift is excluded by statute from
> the annual exclusion.
I'm confused by this statement. Please help me understand.
Example:
Suppose an irrevocable trust owns and pays the premium on a life
insurance policy. That premium is $12k annually. The insured/donor
"gifts" $12k to the ILIT, the ILIT issues Crummey letters, and 30 days
later the trustee pays the premium using the funds.
Does the $12k not qualify for the annual exclusion?
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Posted by Stuart Bronstein on February 22, 2008, 4:08 pm
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>> Now, a gift TO an IRREVOCABLE trust likewise does not qualify for
>> the annual exclusion. The reason is that this is considered to
>> be a gift of a future interest, and that kind of gift is excluded
>> by statute from the annual exclusion.
>
> I'm confused by this statement. Please help me understand.
>
> Example:
> Suppose an irrevocable trust owns and pays the premium on a life
> insurance policy. That premium is $12k annually. The insured/donor
> "gifts" $12k to the ILIT, the ILIT issues Crummey letters, and 30
> days later the trustee pays the premium using the funds.
>
> Does the $12k not qualify for the annual exclusion?
If it's a qualified Crummey trust, yes it does. Simply issuing Crummey
letters is not sufficient. The trust must state that the beneficiary
be given notice of any gift, and have a reasonable time to withdraw the
gift. So for that time (generally 30 days minimum) the gift to the
trust is revocable by the beneficiary.
Normally a gift to a trust is considered a future interest. But if the
beneficiary has the immediate right to withdraw the gift, it's not
considered a future interest, and as a result qualifies for the annual
exclusion.
Stu
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Posted by kastnna on February 22, 2008, 11:05 pm
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> If it's a qualified Crummey trust, yes it does. Simply issuing Crummey
> letters is not sufficient. The trust must state that the beneficiary
> be given notice of any gift, and have a reasonable time to withdraw the
> gift. So for that time (generally 30 days minimum) the gift to the
> trust is revocable by the beneficiary.
>
> Normally a gift to a trust is considered a future interest. But if the
> beneficiary has the immediate right to withdraw the gift, it's not
> considered a future interest, and as a result qualifies for the annual
> exclusion.
Thank you for the well-put clarification. That makes perfect sense.
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
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Posted by inky dink on February 23, 2008, 7:37 am
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>
> Once a trust becomes irrevocable (assuming it's no longer a grantor
> trust), the trust is the legal owner of the property and the maker of
> the gift, so it will not qualify for the annual exclusion.
is an irrevocable trust even subject to the gift tax? I believe IRC 2501
states:
"A tax, computed as provided in section 2502, is hereby imposed for each
calendar year on the transfer of property by gift during such calendar year
by any individual resident or nonresident."
So, asuming the irrevocable trust permits gifts, are they subject to the
gift tax?
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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