Gifting Strategies

Section 2503 (b) Trust

A Section 2503(b) trust requires the mandatory distribution of all income to the income beneficiary of the trust annually or on a more frequent basis. The mandatory distribution of income allows all or a portion of the transfers to these trusts qualify for the $12,000 annual gift tax exclusion. This type of trust offers more flexibility than a Sec. 2503(c) trust or UGMA or UTMA account. The Section 2503(b) trust has no requirements regarding the distribution of principal, and may last for a fixed term, or for the life or lives of the trust beneficiaries.  The principal need not pass to the income beneficiary, and thus may be distributed to other persons you designate as beneficiaries of the trust.