My mother is looking to transfer approximately $350K into an irrevocable trust. I understand that the tax treatment for asset transfer into an irrevocable trust has the same tax treatment as a gift. ====>Correct; Under the Bush tax cuts, a new provision was added to the federal gift tax law, requiring that any transfer of money or other property to a trust after 12/31/2009 be deemed a taxable gift, subjecting the transferor to gift tax ramifications, unless the trust qualifies as a grantor trust of the transferor for income tax purposes (i.e., I mean unless the trust is considered as wholly owned by the transferor or the transferor's spouse under the grantor trust rules of the income tax law .
That being all assets transferred to the trust during the tax year over the first $14K is a taxable event.
My question: is the transferred amount exceeding $14K subject to present year gift tax or does it just count against my mom's $5.43m lifetime exclusion?=========>Yes since the amount of the gift of $350K exceeds $14K(or $28K as gift splitting.Both individuals within the couple can give the maximum gift amount, so that the person receiving the gift may receive double the amount before any type of tax is assessed.),she needs to file her gift tax return of form 709, an info return, with the IRS ; The purpose of IRS Form 709 is to report gifts that are subject to gift and generation-skipping transfer taxes. Say, she makes a gift of $350K to a trust this year. The first $14K($28k for a gift splitting) is covered under the annual exclusion amount, leaving $336K remaining as a taxable gift. No tax will be due, though, because that $336K will count against the $5.43 million lifetime exclusion amount. At her death, that $336K will be added to the value of her taxable estate, and if it's above the then-applicable lifetime exclusion, then she could have estate tax liability. However asfar as I know in US, only 1% of the taxpayers have net positive gift/estate tax laibility.
In addition, gift tax returns are often necessary for more complex estate planning strategies. For instance, annual exclusions don't apply to gifts of future interests, which are common when an estate planning lawyer prepares a trust or other complex gift.