1st Dec 2010

In order for a gift to qualify for the annual ($13,000) or lifetime ($1 million) Gift Tax exemptions, it must be a present interest gift.  A present interest gift is one in which the beneficiary has an immediate, unrestricted right to the use, benefit, and enjoyment of the gifted property.  If Thomas gives his son, Smith, $5,000 and Smith can use it now, it is a gift of a present interest.  If Smith is not entitled to such benefits, then the gift is considered a future interest.  An example of a future interest would be if Thomas established a trust for the benefit or Smith and made a gift to such trust without granting Smith a present right to withdraw the gift.  Such a gift would not be considered a present interest gift and would thus be included in Thomas’ taxable estate upon his death.

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