hard · Certified Financial Planner Tax Planning
The Saini household establishes an Irrevocable Life Insurance Trust (ILIT) for their three children. They contribute $54,000 to the trust in 2026 to pay the annual premium.
If the children have Crummey withdrawal powers, which of the following describes the gift tax treatment of this transaction?
- The parents must use $54,000 of their lifetime exclusion because ILIT contributions do not qualify for gift splitting.
- The contribution is a gift of a present interest and is fully sheltered by the annual exclusion.
- The lapse of the withdrawal power creates a taxable gift from the children to the parents.
- The contribution results in a taxable gift of $35,000 due to the future interest nature of trusts.
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