3.2 Annual Exclusion and Split Gifts

• Library: A Lawyer's Guide to Estate Planning: Fundamentals for the Legal Practitioner (ABA) (2018 Ed.)

3.2 Annual Exclusion and Split Gifts

3.21 Annual Exclusion

As discussed previously, every donor is entitled to an annual exclusion in 2018 of $15,000 per year per gift for gifts to as many different donees as the donor chooses.³¹ The exclusion is indexed for inflation and will increase in future years. The exclusion is allowed only for a present-interest gift, as opposed to a future-interest gift. A present-interest gift is one in which the immediate use of the property is available to the donee. A gift of a future interest, such as a reversionary or remainder interest, is not allowed an annual exclusion.³² This requirement creates a problem when a gift is made to a trust for the benefit of the trust beneficiary.

Example: A transfer of assets to a trust that pays income for the life of the life tenant and then distributes the remainder to the remaindermen on the life tenant's death is a gift of both a present interest and a future interest. The life tenant's interest is a present interest that can be valued and for which the annual exclusion is available; however, the remaindermen do not come into possession of the property until the death of...