Irrevocable Minor's Trusts

Question 1

Purpose 2503(b), or Mandatory Income Trust

Answer 1

• For a beneficiary
• Income interest and principal remainder interest

Question 2

2503(b) Characteristics

Answer 2

• Annual income must be distributed
• Exclusion available for income interest

Question 3

2503(b) Planning Opportunity

Answer 3

Gifts to minors

Question 4

2503(b) Income/Gift Tax Consequences

Answer 4

• Income taxable to beneficiary
• Kiddie tax may apply

Question 5

Purpose 2503(c) Trust

Answer 5

Gift of a future interest, BUT qualifies for annual exclusion

Question 6

2503(c) Characteristics

Answer 6

• Income distribution is discretionary
• Property must be available to beneficiary at 21

Question 7

2503(b) Planning Opportunities

Answer 7

Created to discourage income payout to immature minors solely to take advantage of annual exclusion

Question 8

2503(c) Gift/Income Tax Consequences

Answer 8

If a minor dies before age 21, property goes to the minor’s estate.

Question 9

Purpose Crummey Trust

Answer 9

Allows a right to withdraw for a brief period (usually 30 days), thus creating a present interest that qualifies for the annual exclusion

Question 10

Crummey Trust Characteristics

Answer 10

• Beneficiary usually allowed to withdraw min(amount of the available annual exclusion, value of the gift property transferred)

Question 11

Crummey Trust Planning Opportunities

Answer 11

If trust has multiple beneficiaries, demand right should not exceed max($5,000, 5% of value of property) to avoid taxable gift to remainderman

Question 12

Crummey Trust Gift/Income Tax Consequences

Answer 12

Present interest is created by the right to withdraw

Not withdrawing is a gift, but of a future interest, so inelig. for annual exclusion