2503c Minor’s Trust Attorneys – Pennsylvania
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Making gifts to minors under a Pennsylvania estate plan can be achieved in a variety of ways, including:
Custodial Transfers in PA – Uniform Transfers to Minors Act (UTMA)
A custodial transfer to a UTMA account is simple and enjoys the same advantages as an outright gift, meaning that the transfer qualifies as a present interest, thereby qualifying for the annual gift tax exclusion. For PA estate planning, the annual gift exclusion is important because no gift tax is paid on a gift. The custodian exercises complete control of the account until the child reaches the age of 21. UTMA accounts are very useful for transferring small amounts of money to a child since the child has full access to the account at age 21.
Section 529 Plans
Section 529 plans are advantageous for higher education purposes and are limited to that purpose. A Section 529 plan is: (1) exempt from income tax so that the income earned can grow tax-free; (2) exempt from income tax on the withdrawal for qualified higher education purposes; and (3) gifts by a donor can qualify for the annual gift tax exclusion plus the generation-skipping tax exclusion.
Minor’s Trust Attorneys
Minor’s Trusts, which can include a Crummey Trust or Internal Revenue Code (IRC) Section 2503© Trusts, are another alternative for making gifts to minors under a Pennsylvania estate plan. Generally, the annual gift tax exclusion is not available for a transfer to a trust since such transfer is a gift of a future interest. There are two exceptions to this rule: (1) a statutory exception for trusts created under IRC 2503©; and (2) a type of trust with “Crummey” withdrawal rights.
Under IRC 2503©, transfers to this type of Minor’s Trust qualify for the annual gift tax exclusion under the following conditions:
Often, donors wish to extend the trust beyond the age of 21. A delayed distribution beyond the age of 21 may be accomplished with a 2503© Minor’s Trust, but the child will have a right to withdraw all of the principal at age 21. Even though this right to withdrawal may lapse, the principal of the trust is still subject to withdrawal at the age of 21, which is perhaps the 2503© Minor’s Trust’s greatest drawback. It is for this reason why many people choose to utilize a Crummey Minor’s Trust instead of the 2503© Minor’s Trust as part of a comprehensive PA estate plan.
Contact a Wills and Trusts Attorney in Pennsylvania
Pennsylvania estate planning and the use of trusts involves complex tax considerations and other planning issues that must be addressed. Individuals, partners, or families should always seek the assistance of an experienced Pennsylvania Wills and Trusts attorney when seeking to develop an estate plan in PA.
The skilled Wills and Trusts attorneys at The Martin Law Firm represent clients in Pennsylvania and the surrounding areas for all aspects of PA estate planning, including the development and implementation of Minor’s Trusts. Contact a knowledgeable Pennsylvania Wills and Trusts attorney at The Martin Law Firm at (215) 646-3980 for a free case evaluation.
Our legal team provides individualized legal solutions for our clients by offering high quality legal counsel and representation in diverse areas of law. Our attorneys regularly represent clients throughout Southeast Pennsylvania, including Montgomery County, Bucks County, Chester County, Delaware County, and Philadelphia County.
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