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Tax-free withdrawals by beneficiaries from Irrevocable Gift Trust (IGT)
Anonymous9 views5 answers
myself and my spouse want to setup IGT (donors). Beneficiaries will be adult son and daughter. daughter will be Trustee. both children will have crummy power assign to withdraw cash from IGT.
Q1. i understand each beneficiary can withdraw from IGT tax-free up to annual gift tax exclusion amount. if they have crummy power to withdraw more is it possible that such withdrawals will be tax-free to them but donor either will pay gift tax or use depletion of his life-time allowance before any tax liability occurs?
Q3, unrelated to withdrawals can each adult child give cash tax-free gift to each parent annually within annual exclusion amount?
Q4 can beneficiaries pay directly from IGT to donor's doctors, hospital, nursing home, etc. in emergency without triggering tax any liabilities?
This is a simple online Q&A forum and does not take the place of thorough legal advice. You should consult in person with an estate planning attorney rather than relying on the incomplete answers that you will receive here.
These are specific questions regarding the Trust instrument that we have not reviewed. Sit down with an Estate Planning attorney and go through these questions one by one. See .com under 'Find-A-Lawyer.' Good Luck !!
I agree with the other answers...you are asking some very complex questions and they are highly dependent on what the trust document says. You may, like many people, have the impression that a trust with a particular acronym for a name, like "IGT" is a sort of commodity: that they are all alike and come from a form book. There are virtually infinite variations (and I mean that, it is not hyperbole) in how trusts can be worded and what the consequences will be for gift, estate, capital gain, and income tax purposes.
Seek personal advice from a competent estate planning attorney who can help you actually design a plan (it might include a IGT but not necessarily!) to accomplish your goals and objectives.
I agree, your question is much more complex than this forum allows. The answer I would give, based on what you have posted, is that this situation borders on tax evasion. Giving gifts as a tax avoidance is one thing, but to transfer money back and forth as gifts, or to give money as a gift only to have that money used by the receiver of the gift in order to benefit the giver, is frowned upon by the IRS. Granted, a lot of factors come into play, such as time, amount, etc. But as a general rule, I would advise against setting up a trust for this purpose or expectation.
