Gift In Trust

AAA

DEFINITION of 'Gift In Trust'

An indirect bequest of assets to a beneficiary by means of a special legal and fiduciary arrangement. The purpose of a gift in trust is to avoid taxes on gifts that exceed the annual gift tax exclusion amount. Gift taxes are almost always paid by the gift giver and if they exceed $13,000 in one year the excess is taxable.

INVESTOPEDIA EXPLAINS 'Gift In Trust'

Gift givers can give gifts in excess of the annual exclusion without paying taxes by establishing a special type of trust, such as a Crummey trust. A gift to a Crummey trust allows the beneficiary to withdraw the gift for a limited time, which makes the gift a present interest and makes it 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 it would be subject to gift taxes. That being said, it is generally understood that the beneficiary will not actually withdraw the funds during the withdrawal period. Gifts in trust are commonly used by parents or grandparents who want to establish a trust fund for their children or grandchildren.



RELATED TERMS
  1. Trust Fund

    A trust fund is a fund comprised of a variety of assets intended ...
  2. Estate Planning

    The collection of preparation tasks that serve to manage an individual's ...
  3. Beneficiary

    Anybody who gains an advantage and/or profits from something. ...
  4. Trust

    A fiduciary relationship in which one party, known as a trustor, ...
  5. Crummey Power

    A technique that enables a person to receive a gift that is not ...
  6. Guarantee Company

    A form of corporation designed to protect members from liability, ...
Related Articles
  1. Investing

    Can I donate stock to charity?

    Giving stock, instead of cash, as a donation can greatly benefit both parties. You will find that most charities, hospitals, schools and other nonprofit organizations will accept stock as a gift ...
  2. Retirement

    Top 7 Estate Planning Mistakes

    Many people try to avoid this process altogether, making things difficult for heirs.
  3. Retirement

    Gifting Your Retirement Assets To Charity

    There are several things to consider when it comes to this type of charitable giving. Make sure you're well informed.
  4. Options & Futures

    Getting Started On Your Estate Plan

    With some preparation, you can save your heirs from paying a hefty estate tax. Here are some tips.
  5. Retirement

    Skipping-Out on Probate Costs

    Don't let bad estate planning lead to unnecessary costs and stress for your inheritors.
  6. Investing

    Can I give stock as a gift?

    Stocks, bonds or any other securities can be transferred as gifts. Giving the gift of stock also has benefits for the giver. If the stock has appreciated in value, the holder can avoid paying ...
  7. What's a Trust Fund?
    Personal Finance

    What's a Trust Fund?

    A trust fund is a fund comprised of a variety of assets, established by a grantor, to provide financial security to an individual, most often a child or grandchild - or organizations, such as ...
  8. Taxes

    How are savings bonds taxed?

    Learn who is responsible for reporting U.S. EE savings bond interest for taxation and when the interest can be reported for proper taxation.
  9. A new Supreme Court ruling has some financial advisors rushing to set up trusts to help protect inherited IRAs. Is that necessary?
    Investing Basics

    How Advisors Can Protect Inherited IRAs

    A new Supreme Court ruling has some financial advisors rushing to set up trusts to help protect inherited IRAs. Is that necessary?
  10. Retirement

    What's the difference between a financial advisor and a financial planner?

    Seeking professional advice from a financial advisor may involve asking for financial help from a certified financial planner, stockbroker or an accountant.

You May Also Like

Hot Definitions
  1. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  2. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  5. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  6. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
Trading Center