What Is a Gift in Trust?

A gift in trust is a special legal and fiduciary arrangement that allows for an indirect bequest of assets to a beneficiary. The purpose of a gift in trust is to avoid gift/estate taxes, as there is a澳洲幸运5官方开奖结果体彩♔网: lifetime gift/estate tax exemption limit. For 2025, that limit is $13.99 million. There's also an annual gift exclusion limit—the most you can give in 2025 without reporting it to the IRS (or it counting against your lifetime limit), which is $19,000. Tꦡhis type of trust isꦺ commonly used to transfer wealth to the next generation.

Understanding a Gift in Trust

Gifts in trust are commonly used by parents or grandparents who want to establish a 澳洲幸运5官方开奖结果体彩网:trust fund for their children or grandchildren. Establishing a trust is an 澳洲幸运5官方开奖结果体彩网:estate planning strategy that can be used to pass assets or wealth from the grantor—the owner of the assets creating the trust—to a beneficiary who receives the wealth.

Annual Estate Tax Exemption Amount

Typically, the 澳洲幸运5官方开奖结果体彩网:Internal Revenue Service (IRS) taxes the distribution of assets from an estate if the value of the assets is more than a specific amount called the annual estate tax exemption amount. This amount is $13.99 million for calendar year 2025 and $13.61 million for 2024. The annual gift tax exclusion amount—the most you can give to another person without reporting it to the IRS—is $19,000 in 2025. Any gifts over that amount must be reported to the IRS, and they count against your lifetime gift tax/exemption amount ($13.99 million in 2025).

Crummey Trust

A gift in trust is a viable method of avoiding gift/estate taxes. By establishing a trust, such as a Crummey trust, you can give assets to beneficiaries in excess of the annual gift tax exclusion amount without it counting against y♛our lifetime exemption amount.

A gift to a Crummey trust allows a beneficiary to withdraw the assets for a limited time, which makes the gift considered to be a present interest and eligible for the gift tax exclusion. If the gift did not have these limited-time withdrawal rights, it would be considered a future interest and be subject to 澳洲幸运5官方开奖结果体彩网:gift taxes.

For example, the trust could be set up so that the beneficiary can make withdrawals within a set time period, such as within 60 or 90 days. After that, the gift funds held in the trust fall under the stipulated withdrawal rules as set by the trust's grantor.

For example, let's say a parent designates that a child can't access their trust fund until they turn 21. Even if the child decides to tap into the trust immediately, they only have access to the most recent gift, as all previous gift funds remain protected within the trust account.

Advantages and Disadvantages of a Gift in Trust

In addition to tax benefits, a gift in trust is one method of establishing a financial cushion for future generations. Transferring wealth from one generation to the next via a will or other means of inheritaౠnce is a complicated endeavor. At the same time, these rules can bring enormous benefits to individuals, families, and communities. Understanding the nuances of gifting can bring added value to both grantors and beneficiaries.

One potential drawback to a gift in trust is that providing beneficiaries—in particular, children—澳洲幸运5官方开奖结果体彩网:with immediate accessไ to sizable sums may jeopar♐dize the fund's ability to accumulate long-term wealth. Some families bypass this by setting restrictions, such as l🐬imiting the amount or frequency of withdrawals or ending future gifts to recipients who withdraw funds immediately.

The Bottom Line

With a gift in trust, assets can be transferred based on the grantor's wishes, meaning limitations can be established so that the recipient can access the money only when the stipulated instructions outlined in the trust have been met. For example, a parent might establish a trust in which the funds can't be accessed by the child until their 21st birthday. If you have questions about setting up a trust and its potential for avoiding gift/estate taxes, consult with an estate planning attorney.