Why are some gifts classified as "future interest"?

Gifts classified as "future interest" refer to those that do not provide the recipient with immediate use or possession of the gift. Instead, these gifts are governed by specific constraints or conditions that dictate when the recipient can actually benefit from the gift. For example, a trust that allows a beneficiary to receive income from a property in the future would be considered a future interest, as the beneficiary does not have immediate ownership or access to its benefits.

This classification is significant in the context of tax regulations, specifically with respect to the donor's ability to take advantage of the gift tax annual exclusion. Future interests do not qualify for the annual exclusion, which applies to gifts that provide immediate benefits. Therefore, the constraints and conditions that characterize future interests are crucial to understanding their classification and implications for gift taxation.