Gifts in trust utilizing Crummey Powers

You can make a present interest gift to a trust by adding Crummey Powers. (Crummey in this instance doesn’t mean
lousy. It’s the name of a court case establishing the availability of the annual exclusion to Trusts holding Crummey provisions.) When you can make a gift to a Crummey Trust, the beneficiaries have a right of withdrawal for a period of time. If the right of withdrawal is not used, it lapses. The Trustee must notify the beneficiaries of this right and allow sufficient time for them to exercise the right (for example, a 15 day period). Since the definition of a present interest requires the donee to have the right to property, regardless of whether the donee actually uses the property, a gift to a Crummey Trust is a gift of a present interest.

The beneficiaries may be minors and do not have to have a guardian appointed as long as there is no impediment to a guardian being appointed.

The annual gift tax exclusion is available for primary beneficiaries with a noncontingent interest in the trust and vested remaindermen.
 

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