Bill Set Up Two Trusts in 2014

question 27

Essay

Bill set up two trusts in 2014.The first was for his son,John,to which he contributed $200,000 during that year.(The income interest was valued at $100,000 and the remainder interest's value was $100,000.)Bill plans to continue contributing money to the trust each year but John can withdraw only the lesser of $14,000 or the amount transferred to the trust each year.The trustee can pay the amount annually until John receives the trust assets at age 40.The second trust was for his 10-year old son,Tim.Bill contributed $50,000 in 2015.(The income interest was equal to $10,000 and the remainder interest was equal to $40,000.)The trustee may distribute the income or principal to Tim until he reaches age 21,at which time the assets will be transferred to Tim.In 2015,Bill contributes $10,000 to John's trust and $15,000 to Tim's trust.What types of trusts are these and what are Bill's gift tax consequences in 2014 and 2015?

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Definitions:

Operands

The entities on which operators perform operations in expressions, such as variables or values.

Period

A length or span of time characterized by a specific condition, activity, or event.

Terminate

To bring an activity, process, or operation to an end; in computing, it often refers to stopping a program or process.

Cast Operator

A symbol or method in programming used to convert a variable from one data type to another.