Legal Question in Wills and Trusts in California
Two parents set up an irrevocable grantor trust with 500K of assets. Two children are beneficiaries and one of these is the trustee with full power to access money in trust. One parent passed away and both children wish to gift trust money back to surviving parent of their own volition and give up beneficiary rights. Does the IGT have gift tax consequences as an individual would? Any other tax ramifications they should know about? It is in California if that is an issue.
1 Answer from Attorneys
It most likely would, but a review of the trust would give a definite answer. Each child has a lifetime $1,000,000 gift tax credit (in addition to the $13,000 allowed tax-free per year), so it's also likely no gift taxes would have to be paid. However, whatever portion of the lifetime credit is used will reduce the amounts the child can leave to beneficiaries at his or her death (currently $3,500,000).
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