In short
A Crummey power gives a trust beneficiary a temporary right to withdraw a contribution to the trust. It turns a gift of a future interest into a present interest, so it qualifies for the gift tax annual exclusion.
Key takeaways
- Beneficiaries must be notified and given a reasonable time to withdraw, often 30 days.
- It is commonly used with irrevocable life insurance trusts.
- Gifts to a trust without such rights generally don't qualify for the annual exclusion.
Where it's tested
TCP: Estate & Gift Tax Planning — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A client's total estate is well below the $15 million exemption. The client asks whether to gift highly appreciated stock to children now or hold it until death. From a pure tax standpoint, which is generally better and why?