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*As of June 2017, new Giftrust accounts are no longer available.
A Giftrust is an irrevocable trust that was set up (by a grantor) to be a one-time gift to another person (the beneficiary). The trust has a maturity date, which is when control of the money will transfer to the beneficiary. Grantor's choose the maturity date at the time the trust is established. Review the Giftrust stages to understand what's happening with the account now and what will happen when it matures.
As an irrevocable trust, a Giftrust can only be terminated early with written consent of the grantor, beneficiary and any alternate beneficiaries using the Giftrust Early Termination Form. Terminating the trust moves the maturity date up to the date American Century receives the request. If all parties are not able to consent, the trust cannot be terminated.
Contact an Investment Specialist at 1-800-345-2021.
Several weeks before the Giftrust matures, we will mail a notice to the address of record that the trust will soon mature and be transferred to an Individual taxable account in the beneficiary's name and Social Security number (SSN). Because the beneficiary will be the only person able to manage the account, and be responsible for taxes, he or she will need to take appropriate action below.
Certifiy your Social Security number. If the SSN is not certified, the IRS assumes the beneficiary is subject to backup withholding and requires us to withhold a manditory 28 percent of distributions and withdrawals. In some states, you also may be subject to state backup withholding. Any amounts withheld are remitted to the IRS on your behalf as a credit towards your income tax liability that year.
Now may be a good time to consider the investment options as the trust nears maturity. Those include leaving shares in the All Cap Growth Fund, exchanging into another American Century Investments fund, or redeeming some or all shares. Make sure to read about the tax responsibility before deciding to redeem.
Certify your Social Security Number (SSN) and backup withholding status now.
On the maturity date the following changes occur to the Giftrust account:
Now that the account has matured, make it easy to manage by registering for online access. Transactions that can be made online include:
Transaction activity on a matured Giftrust account (now an All Cap Growth account)--such as a distribution, an exchange or a redemption--means taxes may be owed.
If a beneficiary makes a redemption on a matured Giftrust account, he or she may have to calculate their own cost basis, depending on the year it matured. Taxable gains must also be calculated.
COST BASIS = Initial and all Subsequent Investments + Dividends/Capital Gains Over the Life of the Account
TAXABLE GAINS = Cost Basis - Redemption Amount
The IRS requires the beneficiary to certify their Social Security number (SSN) when the Giftrust matures. If the SSN is not certified, the IRS assumes the beneficiary is subject to backup withholding, and requires us to withhold a mandatory 28 percent from all distributions and redemptions. Any amounts withheld are remitted to the IRS on your behalf as a credit towards your income tax liability for that year. This can easily be avoided by certifiying the SSN at maturity.
If the statement indicates tax withholding, it means distributions or redemptions occured prior to the SSN certification, and that we fulfilled the IRS imposed withholding for the mandatory 28 percent. Withholding will also be reflected on the 1099-DIV or 1099-B for that year.
This information is for educational purposes only and is not intended as a personalized recommendation or fiduciary advice. There are different options available for your retirement plan investments. You should consider all options before making a decision. Our representatives can help you evaluate all of your distribution options.