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2015 Federal Budget – Simplifying the Gift Tax Exclusion

I’ve been sifting through the proposed 2015 Government Budget and will complete the series in a seven day marathon, an article each day for the next seven days. The tax code is so complex that each bit ranges from applying to most of us, to code so specific, it might hit the top fraction of a percent. So please bare with me if the proposed code changes I’m highlighting have no interest for you.

You may know, the gift tax exclusion permits an individual to gift up to $14,000 each year to another person with no tax consequence. Even if you are not wealthy, when you reach an age that you realize you can’t take it with you, some people like the idea of handing out money to their loved ones each year. In some situations where it’s preferable not to have the recipient gain access to the money until they are adults, or even for adults, when they reach a certain age. This is often accomplished via a trust. The process itself is a bit convoluted. The deposit is made to the trust, and the beneficiary, in theory, is given brief access to the funds, but upon signing (or having their guardian sign) a Crummey Notice Letter, the gift to the trust is considered completed.

The proposed change to the code eliminates some of the paperwork, no more letters to deal with, but caps the gift amount to $50K per year via this method. The normal, real, immediate, $14,000 gifts are not impacted.

My view? This actually simplifies the tax code for many who wish to gift up to $50K per year to a small number of beneficiaries, and avoids the smoke and mirrors of the letter acknowledging the gift. I’m with any rules that help simplify the code.

  • Dilip Sarwate April 14, 2014, 10:09 am

    Under **current law**, are you saying that giving upto $50K and getting a Crummey Notice letter etc) is valid for **any** trust e.g. the usual revocable trust that is (or used to be) set up to avoid “wasting” the estate tax exemption for spouses and which is treated, for tax purposes, as the owner itself ? Because the owner of the revocable trust can take any and all assets out of the trust without tax consequences, and thus take back the gift at any time. I thought that the trust itself had to be created as a Crummey Trust in order to use this Crummey Notice letter stuff.

  • Steve April 14, 2014, 2:24 pm

    I think you mean Crummey Notice Letter?

  • Brian April 14, 2014, 3:01 pm

    Thanks Joe for your blog. You make the tax codes simpler for all of us…Nice job!

  • Joe April 14, 2014, 10:40 pm

    Dilip, the proposal is to limit this type of gifting to a total of $50,000/yr among all recipients. Still $14K per person.
    Today, one can use their $14K gift among any number of recipients. The gifts to trusts are still complete, non-revocable, but the beneficiary doesn’t quite have unfettered access. Check out the Budget itself for the full explanation.

  • Dilip Sarwate April 16, 2014, 9:27 am


    You originally said “This actually simplifies the tax code for many who wish to gift up to $50K per year to a **small number** of beneficiaries” but now say “the proposal is to limit this type of gifting to a total of $50,000/yr among **all** recipients”

    So, is it $50K per year per person to “All My Children” via Crummey Letters from each, or max $50K total per year divided among “All My Children” any way that I choose? or subject to a max of $14K per child? Also, does the Crummey Letter make part of a revocable trust subject to Crummey rules or does it implicitly create a separate Crummey trust from the revocable trust?

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