Setting up and making gifts to a 2503(c) Trust (“the Trust”) is an ideal way to make end-of-year gifts to children or grandchildren. Parents and grandparents making end-of-year gifts of cash frequently set up joint accounts with the donee (sometimes referred to herein as “beneficiary”), or establish a custodial account, which in Colorado, is governed by the Colorado Uniform Transfers to Minors Act (UTMA).
There are other ways to make such a gift which results in both estate tax advantages and extended fiduciary control over how the funds are distributed. One of those is the 2503(c) Trust which is the subject of this newsletter.
Under current Federal Gift Tax law, a donor (settlor) can give $13,000 or $26,000 per couple, to each donee to whom the donor wishes to make a gift, without incurring a gift tax. Assuming the donor wishes to have some say over how the funds are used, the gift can be made to a UTMA custodial account or to a Trust.