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Wealthy Families Pay Children's Tax Bills Under IRS Trust Rule

Original: The Rich Pay Their Kids' Income Tax Bill Every Year, and the IRS Ruled in 2004 It Isn't a Gift. The Grantor Trust Rule That Moves Millions Without Touching the $15 Million Exemption

A long-standing IRS ruling from 2004 allows wealthy parents to pay the income tax owed by their children's grantor trusts without the payment counting as a taxable gift. The arrangement, permitted under grantor trust rules, lets families shift millions in additional wealth to the next generation while preserving the roughly $15 million lifetime gift-and-estate tax exemption. Personal finance commentators are highlighting the strategy as an example of how tax rules favor the very wealthy.

Why now: Renewed debate over wealth inequality and tax loopholes used by the richest families has put this IRS-allowed strategy back in the spotlight.

IRSgrantor trustsUS tax code

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• The Rich Pay Their Kids' Income Tax Bill Every Year, and the IRS Ruled in 2004 It Isn't a Gift. The Grantor Trust Rule That Moves Millions Without Touching the $15 Million Exemption · 24/7 Wall St.

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