Regan Clinton established a mandatory income trust (Section 2503 (b)) with the following characteristics for the benefit of her three children: . Regan's husband consented to making this a split gift. .She funded the trust with appreciated securities with a fair market value of $175,000. . Regan named her sister as trustee . The trust will terminate when the youngest child attains age 25, at which time all trust assets are to be distributed to her descendants per capita at each generation. Which one of the following statements is correct regarding the impact of this lifetime transfer on any subsequent lifetime transfers that Regan may wish to make? Regan will have to use enough of her gift tax applicable credit amount to cover the gift tax on $175,000. Regan will have to use some of her gift tax applicable credit amount to cover the gift tax on this transfer. Regan will have to split any gifts made by her husband in future years. The trust income that is distributed to her children will be considered gifts and will reduce the annual exclusions available in each year