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What Is a Gift in Trust?
I'm here to explain that a gift in trust is an indirect way for you to give assets to a beneficiary. As the grantor, you transfer those assets into a trust rather than handing them over outright, and you set the conditions on how and when the beneficiary can access them.
You use this approach to sidestep gift and estate taxes, given the lifetime exemption limit of $13.99 million for 2025 and the annual gift exclusion of $19,000. It's a straightforward estate planning tool that keeps things under control.
Key Takeaways
Let me break this down for you: a gift in trust passes assets to heirs without giving them immediate access, which can help you avoid or cut down on federal gift and estate taxes. For 2025, remember the lifetime exemption at $13.99 million and the annual exclusion at $19,000 per recipient.
Crummey trusts are a go-to option to make gifts count as present interests for that annual exclusion. Without setting proper limits, though, beneficiaries might tap into large sums too early, which could derail your long-term plans.
Understanding a Gift in Trust
You often see gifts in trust used by parents or grandparents setting up trust funds for kids or grandkids. It's an estate planning move where you, as the grantor and asset owner, pass wealth to a beneficiary through the trust structure.
Gift Tax Rules for 2025
The IRS taxes asset distributions from an estate if they exceed the exemption amounts. You can give up to $19,000 per person in 2025 without reporting it, and your lifetime gift or estate tax exemption sits at $13.99 million.
Go over those limits, and it's taxable—you'll need to file IRS Form 709.
What Is a Crummey Trust?
A gift in trust is your way to dodge gift and estate taxes. Set up something like a Crummey trust, and you can gift assets beyond the annual exclusion without eating into your lifetime exemption.
In a Crummey trust, the beneficiary gets a short window to withdraw the assets, qualifying the gift as a present interest for the exclusion. Without that, it's a future interest and taxable.
Take this example: You contribute $19,000 to a Crummey trust for your child. They have 60 days to pull it out; if not, it stays in the trust per your rules, like access at age 21. This qualifies for the annual exclusion, and you keep control.
You can even add a Crummey provision to other trusts, such as life insurance trusts.
Advantages and Disadvantages of a Gift in Trust
Beyond taxes, a gift in trust builds a financial base for future generations. Transferring wealth through wills or inheritance gets complicated, but understanding gifting rules adds real value for you and your beneficiaries.
One downside is that giving beneficiaries—especially kids—quick access to big amounts might prevent the fund from growing long-term. You can counter this with restrictions on withdrawals or by stopping future gifts if they cash out early.
What Is the 2025 Gift Tax Exclusion Amount?
You can give up to $19,000 to another person in 2025 without IRS reporting, and it won't count against your lifetime exemption. That's up from $18,000 in 2024.
What Is the 2025 Lifetime Gift Tax/Estate Tax Exemption Amount?
The max you can give over your lifetime or leave in your estate without taxes is $13.99 million in 2025, compared to $13.61 million in 2024.
What Is a Trust?
A trust is a legal setup where you, the grantor, hand assets to a trustee for a beneficiary. Eventually, often after your death, those assets go to the beneficiary.
The Bottom Line
A gift in trust lets you give generously while maintaining control and shielding assets—it's effective for cutting estate taxes. Trusts have their legal complexities, though, so if you're eyeing this for big gifts or planning, talk to an estate attorney to make sure it fits your objectives.
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