District of Columbia General Form of Trust Agreement for Minor Qualifying for Annual Gift Tax Exclusion
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How to fill out General Form Of Trust Agreement For Minor Qualifying For Annual Gift Tax Exclusion?
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FAQ
A 2503(c) trust, or minor's trust, is a trust established to hold gifts for one child until he or she attains age 21. A gift to this type of trust qualifies for the annual federal gift tax exclusion.
The key difference between a 2503(c) trust and a 2503(b) trust is the distribution requirement. Parents who are concerned about providing a child or other beneficiary with access to trust funds at age 21 might be better off with a 2503(b), since there is no requirement for access at age 21.
Form 709 is an annual return. Generally, you must file Form 709 no earlier than January 1, but not later than April 15, of the year after the gift was made. However, in instances when April 15 falls on a Saturday, Sunday, or legal holiday, Form 709 will be due on the next business day.
2503(c) trust has one beneficiary, and the assets in the trust are irrevocably his or hers (i.e., the assets cannot be redirected to another beneficiary); Because the trust is irrevocable, the grantor gives up total control of the assets; The trust income tax rates may penalize those trusts that accumulate income; and.
A Section 2503(c) trust allows all the principal and income to be used for the child until he reaches the age of 21, unlike the 2503(b) trust that extends beyond age 21 and requires income to be paid to the child annually. The trustee can pay the child's college expenses from the 2503(c) trust.
Gifts in trust do not qualify for the annual exclusion unless the trust either qualifies as a Minor's Trust under Internal Revenue Code Section 2503(c) or has certain temporary withdrawal powers called Crummey powers.
A gift in trust is a way to avoid taxes on gifts that exceed the annual gift tax exclusion amount. One type of gift in trust is a Crummey trust, which allows gifts to be given for a specific period, establishing the gifts as a present interest and eligible for the gift tax exclusion.
I. Late Filing Penalty: If you miss the filing deadline, IRC § 6651(a)(1) imposes a late filing penalty equal to five percent of the net tax due. This penalty is imposed each month with respect to which the taxpayer is delinquent, but may not exceed 25 percent of the net tax amount.
Section 2503(b) is also known as a Qualifying Minor's Trust or Mandatory Income Trust. This is an irrevocable trust which requires distribution of income on an annual basis. Most often, distributed funds are placed into a custodial bank account until the child reaches legal age.
Filing a gift tax return Generally, a federal gift tax return (Form 709) is required if you make gifts to or for someone during the year (with certain exceptions, such as gifts to U.S. citizen spouses) that exceed the annual gift tax exclusion ($15,000 per person for 2020 and 2021).