Unless one is dealing with The Uniform Transfers to Minors Act or a minor’s trust under Internal Revenue Code (IRC) §2503(c), generally, in order for one to avail themselves of the gift tax annual exclusion afforded under IRC §2503(b), the gift must qualify as a present interest. For example, if a donor contributed the annual exclusion amount ($13,000 per donee or $26,000 if spouses gift split) to a trust in any asset form, such as cash, real property, securities, etc., it would amount to a gift of a future interest and would not qualify for the annual exclusion.
The issue is not a question of vesting, but rather, immediate possession. In order to obtain the annual exclusion, the donor must convert the future interest held in trust to a present interest. This conversion is accomplished by giving the donee/beneficiary the opportunity to withdraw the gift from the trust with the hope that the withdrawal is never made, and the gift remains within the trust. This device was conceived from the facts set forth in Crummey v. Commissioner.1
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