Discounted Gift Trust
A discounted gift trust is a type of trust that is used as a way to transfer assets to beneficiaries while reducing the value of the gift for tax purposes. This type of trust is often used by people who want to make gifts to their children or other loved ones, but who are concerned about the potential tax implications of making large gifts.
In a discounted gift trust, the grantor (the person creating the trust) transfers ownership of certain assets to the trust, and the trust then makes gifts to the beneficiaries. The value of the gift is typically discounted to reflect the fact that the grantor is giving up ownership of the assets and that the beneficiaries will not receive the assets immediately.
The discounted value of the gift can significantly reduce the tax consequences of the gift, as the tax on gifts is based on the value of the gift at the time it is made. By reducing the value of the gift, the grantor may be able to make larger gifts without incurring as much tax.
It’s important to note that discounted gift trusts can have complex tax implications, and it’s important to carefully consider the terms of the trust and consult with a qualified tax professional before setting one up.