Gift Tax and the Irrevocable Trust for Estate Distribution

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Irrevocable Trust Letter

Dear Mr. Feinstein:

I enjoyed seeing you again at the Fosters' party. Hope everything works out for you and your wife with the upcoming trip!

You had asked about establishing an irrevocable trust for your two grandchildren. This would be a good way to ensure that the children are paid by the trust for 20 years with the principal distributed to them at the end of that time. However, there are certain stipulations that must be met with an irrevocable trust. With a revocable trust, you still maintain some control over the assets. With an irrevocable trust, this is not the case. The assets belong totally to the trustees and they are responsible for maintaining them. Your control over how that management is conducted is gone.

With that said, there is no reason to think this would be anything other than a good arrangement. For example, an irrevocable trust would allow you to avoid estate taxes, as the irrevocable trust would not be subject to these, and you could also avoid paying a gift tax so long as the amount given does not exceed the annual exclusion amount in terms of transferring funds to a an irrevocable trust already established (Helsell, Fetterman, 2013; Carnes, 2015)

Were you to create an irrevocable gift trust, you could gift a total amount to the trust and that amount would not be subject to a gift tax at all, with the qualification being that you the donor do not make any other gifts to the donors or trustees within that same calendar year (Nash, Kromash, 2015).

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At the same time, there are alternatives available for you to consider, should you choose to consider options regarding a strategy of reducing both estate tax and maximizing potential advantages of the payment of gift taxes on transfers of property.

This is important to keep in mind because in spite of what the laws are regarding irrevocable trusts and creditors' access to them, state and federal regulators are capable of changing laws without providing grandfather clauses; thus, while an irrevocable trust may seem risk free -- nothing really is

For this reason, you might consider the qualified personal residence trust, which allows you to transfer your residence to a trust while allowing you to retain tenancy for ten years, upon which time your residence is then transferred to the beneficiaries that you have selected. This….....

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"Gift Tax And The Irrevocable Trust For Estate Distribution" (2016, June 07) Retrieved July 3, 2025, from
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"Gift Tax And The Irrevocable Trust For Estate Distribution", 07 June 2016, Accessed.3 July. 2025,
https://www.aceyourpaper.com/essays/gift-tax-irrevocable-trust-estate-distribution-2160106
   

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