Which trust type will NOT qualify as a gift of present interest for the annual exclusion?

Which trust type will NOT qualify as a gift of present interest for the annual exclusion?

• A. Irrevocable trusts with Crummey provisions
• B. 2503(c) trusts for minors
• C. Simple trusts
• D. Complex trusts

Answer: (D)

Present-interest gifts are those the beneficiary can use or access today. For the annual gift tax exclusion, the gift must give the recipient an immediate right to the value transferred. Irrevocable trusts with Crummey provisions create a temporary withdrawal right for the beneficiary, so the gift to the trust is treated as a present interest and qualifies for the exclusion. A 2503(c) trust for a minor is set up so the minor can benefit from the gifts, typically through current access or distributions, which also counts as a present interest. A simple trust must distribute all income to beneficiaries currently, so the beneficiary has an immediate right to the income, again a present interest. A complex trust, however, can accumulate income and exercise discretionary discretion over distributions to beneficiaries, meaning there isn't a guaranteed present right to the trust assets. Because of that, gifts to a complex trust generally do not qualify as gifts of present interest for the annual exclusion.

Present-interest gifts are those the beneficiary can use or access today. For the annual gift tax exclusion, the gift must give the recipient an immediate right to the value transferred.

Irrevocable trusts with Crummey provisions create a temporary withdrawal right for the beneficiary, so the gift to the trust is treated as a present interest and qualifies for the exclusion. A 2503(c) trust for a minor is set up so the minor can benefit from the gifts, typically through current access or distributions, which also counts as a present interest. A simple trust must distribute all income to beneficiaries currently, so the beneficiary has an immediate right to the income, again a present interest.

A complex trust, however, can accumulate income and exercise discretionary discretion over distributions to beneficiaries, meaning there isn't a guaranteed present right to the trust assets. Because of that, gifts to a complex trust generally do not qualify as gifts of present interest for the annual exclusion.