Brighton, MA asked in Estate Planning, Family Law, Real Estate Law and Tax Law for Massachusetts

Q: Can money be gifted to a irrevocable trust ?

I have 3 questions:

1) Can money be gifted to a irrevocable trust?

If so

2) Is their a maximum amount allowed to be gifted in a certain period e.g like yearly etc?

3) Can a trustee and beneficiary to the same trust also gift money to the same trust?

Thank you

1 Lawyer Answer
James L. Arrasmith
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  • Estate Planning Lawyer
  • Sacramento, CA

A: Yes, money can be gifted to an irrevocable trust. However, there are some important considerations and limitations:

1. Gift tax exemption: As of 2024, an individual can gift up to $18,000 per recipient per year without triggering the need to file a gift tax return or pay gift taxes. This is known as the annual gift tax exclusion. If you exceed this amount, you may need to file a gift tax return and the excess may count against your lifetime gift and estate tax exemption.

2. Lifetime gift and estate tax exemption: As of 2024, the lifetime gift and estate tax exemption is $13.61 million per individual. This means that you can give away up to this amount during your lifetime or at death without owing any federal gift or estate taxes. Gifts to an irrevocable trust that exceed the annual gift tax exclusion will count against this lifetime exemption.

3. Trustee and beneficiary gifting: A trustee who is also a beneficiary of the same irrevocable trust can gift money to the trust. However, if the trustee has discretionary power over the trust assets and can distribute funds to themselves, the gifted assets may be included in their taxable estate. It's crucial to consult with an estate planning attorney to structure the trust properly and avoid unintended tax consequences.

Keep in mind that trust and estate tax laws can be complex and may vary by state. It's always best to consult with a qualified estate planning attorney and tax professional when considering gifting money to an irrevocable trust to ensure compliance with all applicable laws and to minimize potential tax liabilities.

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