Irrevocable Trusts and Gift Tax Returns

[WhiteOleander]

Does anyone know if t/p sets up an irrevocable trust and transfers their assest into it to fund it, if they have to do a gift tax return on the assets tranfered in? And if so, how are the assets valued for the gift tax return? Basis to the t/p or FMV?

I have read several different things and can't find a definate answer.

Thanks

[BOB W]

As far as I know it is at grantor's basis> like all gifts. Just have to wait 3 years to lock it in at cost basis.

[WhiteOleander]

As far as I know it is at grantor's basis> like all gifts. Just have to wait 3 years to lock it in at cost basis.

Thanks Bob. I'm not well studied in Trusts. Could you elaborate a little more. I gather from your answer, that the gift tax return is required.

So, the trust has to be in existence for 3 years? In my situation, client is 80 years old. She and family are setting up the irrevocable trust for her assets because she is going into a nursing home. If she starts to decline mentally, they want everything to be in place. So, they want to know if a gift tax return is required. I read one thing on the IRS site that said it might be. Wow, that really cleared it up.

[S T]

Irrevocable

Actually I think for Medicaid purposes, the look back is 5 years.

and I don't believe there needs to be a gift tax return.

I just closed an Irrevocable Trust, that had a Private Annuity in it from a sale of the primary residence. I came in on the back end, and the prior accountant and attorney, did not file a Gift Tax Return. Assets were just transferred for the grantor's behalf and then there was a 2nd benficiary in case of death. Client for the Irrevocable had health issues and required Nursing Care.

I found this and maybe it will assist you http://www.money-zine.com/Financial-...ng-Strategies/

Sandy

[Lion]

Maybe

I had an older woman who transferred assets to an LLC with her son and his wife as members. A gift tax return was required. The LLC received the assets (her house, mostly) at mother's basis. That's not the same entity as an irrevocable trust, but it is an entity separate from the donor... Can't remember where I researched, though. I was at Block at the time, so probably my old texts and the cites they led me to.

[WhiteOleander]

Thanks all. I will keep researching. Then when I find the answer, I'll report back.