A present interest gift is a transfer of property or money in which the recipient has an immediate, unrestricted right to use, possess, or enjoy the gift. Under U.S. tax law, only present interest gifts qualify for the annual gift tax exclusion, which allows donors to give up to a specified amount per recipient each year without using lifetime exemption. In life insurance planning, contributions to an irrevocable life insurance trust (ILIT) are often structured as present interest gifts using Crummey withdrawal powers, giving beneficiaries a temporary right to withdraw contributions. This structure allows premium payments to qualify for the annual exclusion while still ultimately funding long-term death benefit coverage inside the trust.

In advanced estate planning, attorneys and advisors distinguish between present interest gifts and future interest gifts when designing trust funding strategies. They draft trust provisions and Crummey notices so that premium payments to ILITs or other trusts count as present interest gifts to beneficiaries. Advisors coordinate with CPAs to make sure clients understand when gift tax returns are required and how annual exclusion usage is tracked. When explaining life insurance funding, they may say that beneficiaries have a brief window each year to withdraw contributions, after which the funds remain in trust to support premiums. Clear explanation of present interest gifts helps clients see how life insurance, trusts, and gift tax rules work together in their wealth transfer plans.