Gift to Irrevocable Trust and Form 709

[gregt75]

I have a client who gifted his house and life insurance policies to an irrevocable trust. He no longer has any rights to them. His son is the trustee and beneficiary. I am trying to fill out form 709 but was not sure if I should fill out Part 1 or Part 3 of Schedule A. I understand it is a direct skip because his son inherits everything upon his father's death so I did not think it was a skip. I was not sure if GST applied here. The only thing is my client's son dies before him then it would go to his granddaughter. We are not talking huge amounts (Less than 450k) here either. It is way under the exemption amount. Please advise. Thanks.

[appelman]

Do you mean that the trust ends when your client dies?

That would seem to defeat much of the purpose of a trust. Sounds like Part 3 of Schedule A to me:

"Gifts to trusts that are currently subject to gift tax and may later be subject to generation-skipping transfer tax. You
must list these gifts in chronological order."

There are some tricky allocation options. You might want to consult the lawyer who prepared the trust.

I have a client who gifted his house and life insurance policies to an irrevocable trust. He no longer has any rights to them. His son is the trustee and beneficiary. I am trying to fill out form 709 but was not sure if I should fill out Part 1 or Part 3 of Schedule A. I understand it is a direct skip because his son inherits everything upon his father's death so I did not think it was a skip. I was not sure if GST applied here. The only thing is my client's son dies before him then it would go to his granddaughter. We are not talking huge amounts (Less than 450k) here either. It is way under the exemption amount. Please advise. Thanks.

[gregt75]

Yes, the trust ends when the client dies. It was created to protect the assets from the Medicaid provision if his spouse had to be put in a home.

[S T]

Don't have an answer for you

But gotta luv the Attorneys that create these Medicaid scenarios (Eldercare)- Seeing more and more of them and someone is not looking at Gift Tax Rules and/or Income Tax Rules,

i.e. cash in IRA, possible life insurance (depending on policy and cash values, etc ) and distribute to Irrevocable Trusts - isn't this a taxable event?

Then if we are looking at all this going on - not that we as Preparers are concerned with Tax Reporting (other than distributions and/or Gift, etc - but Medicaid Rules, isn't there a 5 year look back rule of moving assets ?

Sandy