160 / Is the annual gift tax exclusion available when a life insurance policy is placed in an irrevocable trust for a minor beneficiary?

IRC Section 2503(c) provides that there is a gift of a present interest if the property that constitutes the gift and all income from the property (1) may be expended for the benefit of the minor, and (2) will, to the extent not so expended, pass to the minor when the minor is age 21, or, if the minor dies before reaching age 21, be payable to the minor’s estate or as the minor may appoint under a general power of appointment.¹ The fact that under local law a minor is legally unable to exercise a power or to execute a will does not cause the transfer to fail to satisfy the conditions.² Any premiums paid on the policy by the grantor should qualify as gifts of a present interest ( Q 223).

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1.     IRC § 2503(c).

2.     Treas. Reg. § 25.2503-4.

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