George Transfers Property to an Irrevocable Trust for the Benefit

question 12

Multiple Choice

George transfers property to an irrevocable trust for the benefit of his adult children and names himself as trustee. The trust document requires the trustee to distribute trust property to the beneficiaries at the trustee's discretion with the possibility of no distribution to certain beneficiaries as the trustee deems appropriate. The trust will terminate at the end of nine years, and the property will pass to George's children. Which of the following statements is correct?

• A)The beneficiaries receive a present interest in the trust property when George transfers the assets to the trust.
• B)The transfer by George is eligible for the annual gift tax exclusion.
• C)George's transfer of property to the trust is not taxed under gift tax rules at the date of transfer.
• D)George's transfer of property to the trust is a gift of a future interest.

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Definitions:

Risk Level

An indicator of the level of risk and possible monetary loss associated with making an investment choice.

Payback

The period of time required for the return on an investment to "repay" the sum of the original investment.

Time Value of Money

The theory that current money holds more value than equal amounts in the future because of the earnings it could potentially produce.

Specified Point in Time

Refers to a particular moment or exact date that is identified for an event or action to occur.