Assume Kenny and Melissa had Kole today and Kenny wanted to create a trust for K

Question

Assume Kenny and Melissa had Kole today and Kenny wanted to create a trust for Kole’s future benefit. Kenny would like to create a trust that allows him to make use of the annual exclusion. He wants the trust to accumulate income until Kole reaches age 21, at which point the entire trust will be distributed to Kole. Which of the following devices would be appropriate to accomplish Kenny’s goals?

A) An UGMA device

B) An UTMA device

C) A section 2503(b) device

D) A section 2503(c) device

I believe the answer is "D", if you agree please let me know. If you think differently, then please provide a detail explanation of your answer. Thank you.

Explanation / Answer

The answer will be D). A section 2503 (c) device.

Section 2503(c) trust is a irrevocable trust, in which income and principal distribution is at the discreation of the donee, until the minor become the adult. So Kenny can choose to make use of annual exclusion and when Kole reaches the age of 21, entire trust will be distributed to Kole.

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