In a recent case, Turner, T.C Memo. 2011-209, the Tax Court ruled that formal notice of the withdrawal power is not required. The result of this Tax Court case is that, if a notice requirement is not satisfied regarding a particular transfer to a trust, the taxpayer now has an argument that such notice is not required and the annual exclusions claimed were valid.
But, hold on…the IRS may still continue to argue that notice is required for a transfer to a trust subject to a withdrawal power to be eligible for the gift tax annual exclusion. The safe course of action for our clients to continue to give notice to the trust beneficiaries if they are claiming a gift tax annual exclusion.
