[Code of Federal Regulations]
[Title 26, Volume 14]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR25.2503-4]

[Page 529]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 25_GIFT TAX; GIFTS MADE AFTER DECEMBER 31, 1954--Table of Contents
 
Sec.  25.2503-4  Transfer for the benefit of a minor.

    (a) Section 2503(c) provides that no part of a transfer for the 
benefit of a donee who has not attained the age of 21 years on the date 
of the gift will be considered a gift of a future interest in property 
if the terms of the transfer satisfy all of the following conditions:
    (1) Both the property itself and its income may be expended by or 
for the benefit of the donee before he attains the age of 21 years;
    (2) Any portion of the property and its income not disposed of under 
subparagraph (1) of this paragraph will pass to the donee when he 
attains the age of 21 years; and
    (3) Any portion of the property and its income not disposed of under 
subparagraph (1) of this paragraph will be payable either to the estate 
of the donee or as he may appoint under a general power of appointment 
as defined in section 2514(c) if he dies before attaining the age of 21 
years.
    (b) Either a power of appointment exercisable by the donee by will 
or a power of appointment exercisable by the donee during his lifetime 
will satisfy the conditions set forth in paragraph (a)(3) of this 
section. However, if the transfer is to qualify for the exclusion under 
this section, there must be no restrictions of substance (as 
distinguished from formal restrictions of the type described in 
paragraph (g)(4) of Sec.  25.2523(e)-1 by the terms of the instrument of 
transfer on the exercise of the power by the donee. However, if the 
minor is given a power of appointment exercisable during lifetime or is 
given a power of appointment exercisable by will, the fact that under 
the local law a minor is under a disability to exercise an intervivos 
power or to execute a will does not cause the transfer to fail to 
satisfy the conditions of section 2503(c). Further, a transfer does not 
fail to satisfy the conditions of section 2503(c) by reason of the mere 
fact that--
    (1) There is left to the discretion of a trustee the determination 
of the amounts, if any, of the income or property to be expended for the 
benefit of the minor and the purpose for which the expenditure is to be 
made, provided there are no substantial restrictions under the terms of 
the trust instrument on the exercise of such discretion;
    (2) The donee, upon reaching age 21, has the right to extend the 
term of the trust; or
    (3) The governing instrument contains a disposition of the property 
or income not expended during the donee's minority to persons other than 
the donee's estate in the event of the default of appointment by the 
donee.
    (c) A gift to a minor which does not satisfy the requirements of 
section 2503(c) may be either a present or a future interest under the 
general rules of Sec.  25.2503-3. Thus, for example, a transfer of 
property in trust with income required to be paid annually to a minor 
beneficiary and corpus to be distributed to him upon his attaining the 
age of 25 is a gift of a present interest with respect to the right to 
income but is a gift of a future interest with respect to the right to 
corpus.