In the US, if I create a trust and fund it, if the beneficiary of that trust has an "immediate benefit" (immediate access to some part of the fund) to any part of the trust balance, then some or all of the trust funding is subject to Gift Tax. On the other hand, if the beneficiary has a "future benefit", then no Gift Tax is triggered. Correct me if I am wrong on this.

So the question I have is how far into the future do you have to go to convert an "immediate benefit" into a "future benefit"?If the beneficiary won't be able to touch the balance for 20 years, that is probably a "future benefit". How about six months? What is the smallest amount of time that would count as the "future" based on IRS rules?

  • 1
    I'm voting to close this question as off-topic because it belongs on money.stackexchange.com Mar 3, 2020 at 21:44
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    @BlueDogRanch I disagree. I think this is a potential legal questions.
    – Viktor
    Mar 3, 2020 at 21:51

1 Answer 1


Your understanding is basically completely wrong. You pretty much have it backwards. It is easier to explain how the law really is than to try to correct your assumptions.

In the U.S., the general rule is that if you create a trust and transfer property to the trust, then the transfer of property to the trust is a gift for purposes of federal gift taxation (unless an exception applies).

If the transfer of property to the trust is a gift for purposes of federal gift taxation, then the gift must be reported on a gift tax return (Form 709). Usually, no gift tax will be due upon the filing of the Form 709 unless you have made more than $11.58 million of gifts in your lifetime.

There are two main exceptions to this rule.

First, if you retain certain rights in the trust that causes the property of the trust to be treated as if it is owned by you for gift tax and estate tax purposes, such as the right to revoke the trust, or the right to distribute funds from the trust to yourself not subject to any fiduciary duty, the transfer of property to the trust is not treated as if it happened at all, and there is no gift for tax purposes at that time.

If you die, or you otherwise subsequently cease to have the rights in the trust that caused the property in the trust to be owned by you for gift and estate tax purposes, the law treats this as a transfer of the property in the trust that is subject to gift or estate taxation at that time.

Second, a transfer of property to a trust that has a "Crummy Power" that belongs to one of the beneficiaries of the trust (who is not you) is not a taxable gift if the value of the property transferred to the trust over which there is a Crummy Power is less than the annual exclusion for gift tax purposes (currently $15,000 per donor per beneficiary per year). (The term "Crummy" is surname of the taxpayer in the tax law case that established the legality of this form of gift tax planning method.)

If a trust has a Crummy power, then a beneficiary of the trust (other than you), has the unilateral right to withdraw the contribution you made to the Trust in their name immediately, if that right is exercised within a certain amount of time. If the right is not exercised, it lapses and subject to certain IRS regulations, the lapse of the power does not constitute a gift from the beneficiary of the trust to the trust either for gift tax purposes. Nobody ever actually exercises their right to withdraw the amount contributed to the trust. But, the right to do so turns the gift from a gift of an interest in a trust to the beneficiary (which is subject to gift taxation), to a transfer of a present interest in property to the beneficiary (which is not subject to gift taxation to the extent that the value of the present interest in property is less than or equal to the annual exclusion for gift tax purposes (i.e. $15,000 in the year 2020)).

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