Why would you need this type of Trust?
A gift made to this type of trust is not a future interest and thus qualifies for the annual exclusion amount. The Trustee is given control over income and principal.
Is it irrevocable or revocable?
This type of Minor Trust is irrevocable, meaning once it is created, it cannot be changed.
Is a separate tax identification required? The Trust does require a separate Tax Identification Number.
How does it work?
Both principal and income must be available to the minor at the unrestricted discretion of the trustee while the beneficiary is younger than 21 years old. Upon reaching the age of 21, the beneficiary must have the right to receive all accumulated income and principal. This right may be for a limited period, such as thirty days, after which the Trust could continue until it terminates at that time and in the manner specified in the original Trust document.
If the beneficiary dies before age 21, all income and principal must be paid to the beneficiary’s estate or to persons the beneficiary has named using a general power of appointment. However, this type of trust is rarely used because it gives a 21-year-old the right to use the property.