Personal financial and wealth planning
The Gifting and Education Plan
Move wealth to the next generation cleanly: exclude present-interest gifts, superfund a 529, pick the right credit, and watch the kiddie tax.
How the exam words it
- -The stem gives gifts by donee and asks the taxable gift after the 19,000 annual exclusion, doubled to 38,000 with gift-splitting.
- -It puts a gift in trust and asks whether it is a present interest, keying on a Crummey withdrawal right.
- -It asks the maximum 529 contribution under the five-year election, pointing to 95,000 per donor or 190,000 for a splitting couple.
- -It gives tuition and a student's year and asks for the American Opportunity or Lifetime Learning credit, or taxes a child's unearned income.
The playbook
- 1Exclude 19,000 per donee (38,000 with gift-splitting), but only for present interests; a future-interest trust gift uses lifetime exemption.
- 2Add a Crummey withdrawal right to convert a trust contribution into a qualifying present interest.
- 3Superfund a 529 with five years of exclusions at once (95,000 per donor), spread ratably, using no lifetime exemption if no other gifts are made.
- 4Pick the American Opportunity Credit (up to 2,500, 40 percent refundable) for the first four years, and tax a child's net unearned income over 2,700 at the parent's rate.
The trap
Excluding a future-interest trust gift that lacks a Crummey power, or taxing all of a child's unearned income at the parent's rate. Only present interests qualify, and only the amount over 2,700 hits the parent's rate.
How the exam varies it
The same pattern, re-skinned along these axes:
Annual exclusion and gift-splitting versus present versus future interest529 five-year superfunding limitsEducation credit choice versus the kiddie tax on unearned income
Drill this pattern
8 questions of The Gifting and Education Plan from across the AUD topics. Clear it by getting 5 right with a streak of 3.