Are Distributions From A Trust Of A Deceased To Beneficiaries Considered Gifts?

[Romper]

Example - Spouses assets are held in their revocable Trust. Surviving spouse dies, distributions are made as cash to beneficiaries listed in the Trust.

Do I understand this correctly?

1. Gift Tax Return is NOT required if distributed directly to the beneficiaries in cash.

2. Gift Tax Return IS required if the cash is deposited into an account within a beneficiaries revocable trust.

"The IRS does not levy gift taxes on trusts, nor does it consider payments from the trust to a beneficiary as a gift. However, if you make a gift "in trust," meaning if you donate money to a trust for someone's immediate benefit, then the gift is subject to gift tax and the exclusion amount."

https://finance.zacks.com/trust-federal-gift-tax-exemption-11312.html

[Anonymous_ · Accepted solution]

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@Romper wrote:

1. Gift Tax Return is NOT required if distributed directly to the beneficiaries in cash.

2. Gift Tax Return IS required if the cash is deposited into an account within a beneficiaries revocable trust.

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1) That is correct; a distribution from a trust to a beneficiary is not technically considered to be a gift for which a gift tax return (Form 709) would be required.

2) A gift to a trust (revocable or irrevocable) is considered to be a gift to each of the beneficiaries. If the amount exceeds the annual exclusion, a gift tax return would be required.

[Romper]

Thankyou for your reply. It's the answer I was hoping for.