Submitted by GailT on Thu, 01/27/2011 - 09:23
Posted in
Although I'm not terribly close to my daughter, I would like to make a series of gifts to my three grandchildren, perhaps this year and a few years after that. I understand I can give the kids up to $13,0o0 per year without incurring gift taxes but I don't want them or my daughter to have control of the money. I would like the money to be available only to the kids when they turn 25 and prevent my daughter from ever touching the money. Is there an easy way for me to do this under MA law? Thank you in advance.
Crummey Trusts
I can think of one way to approach your issue. You could set up three "Crummey" Trusts (named after the court that approved this type of trust). People trying to set up trusts for children or others often face one perplexing issue regarding gift taxes: In order for a gift to avoid being taxed (the gift tax exclusion that you mentioned in your question), the recipient must have a "present interest" in the money. In other words, they must have the actual ability to access the funds. A crummey trusts addresses this issue by allowing the beneficiaries access to the funds for a limited time. Your grand-kids must be notified that, at least for some period of time (often 30 days is used), they can take the money out of the trust. Then, after that period has passed (and the present interest requirement is satisfied), the kids can no longer get at the money until they reach the age specified in the Crummey trust.
Typically, to discourage the little darlings from grabbing the cash within the 30 day window, the person who sets up the trust let's the beneficiary know that if they take the money out of the trust, there will be no additional gifts in the future. I'm sure issues have developed with Crummey trusts and kids who just can't wait for the money, but I'm guessing most kids will listen to their grandparent and leave the money alone. And, with the strategy you envision, if the kids ignore your wishes and raid the funds during the 30 day window, you can choose not make additional gifts in the next few years. Talk to your estate planning attorney before attempting this or any other complex estate planning strategy. He or she will have additional information for you about Crummey trusts and may have other planning options for you. Good luck.