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A gift trust is a special legal and fiduciary arrangement that allows for an indirect bequest of assets to a beneficiary.
A gift trust provides an IHT planning route for those who want to make an outright gift in a tax-efficient way.
Some individuals are averse to making substantial gifts directly to minors. For example, if they have young children, they may want the children to inherit the money at an age when they are more ﬁnancially mature, or they may want to gift away money without affecting their spouse’s access to the funds.
Key features of a gift trust:
Who the gift trust is suitable for:
Advantages and disadvantages of a gift trust:
A gift trust is commonly used by parents or grandparents who want to establish a trust fund for their children or grandchildren.
A gift trust is a viable method to avoid taxes on gifts that exceed the annual gift tax exclusion limit.
For the 2021 tax year, that amount is $15,000 or less made in a calendar year by an individual and $30,000 from a couple (the same as 2020).
A gift trust can be a useful solution, but whether it is applicable has to be determined on a case-by-case basis, as does the case for using trusts in general.
NOTE: Because trusts are so unique to each individual, it’s impossible to give them a rating for their overall performance and suitability. Therefore these reviews do not come with a star rating.