What Does Gift in Trust Mean?
A gift in trust is a gift that is given to a beneficiary but whose ownership is given to a trust. Granting ownership to the trust is a way to avoid paying the gift tax, which would otherwise have to be paid by the gift-giver if they made gifts in excess of $13,000 in a single year.
Insuranceopedia Explains Gift in Trust
Gifts in trust are commonly established by parents or grandparents who want to give large gifts to their children or grandchildren without having to pay excessive gift taxes.
Suppose that someone wants to give a $50,000 gift to their grandson. If they were to simply write a check or give the amount in cash, then it would be subject to the gift tax. However, if they created a gift in trust for the gift, they could avoid the gift tax and the beneficiary would be able to withdraw the funds during special withdrawal periods.