In the United States, a Crummey trust is a

trust Trust often refers to: * Trust (social science), confidence in or dependence on a person or quality It may also refer to: Business and law * Trust law, a body of law under which one person holds property for the benefit of another * Trust (bus ...

for the benefit of individuals into which gifts are made in a manner qualifying them for exclusion from the unified gift and estate tax. The trust is named for the first person to use such a structure, D. Clifford Crummey.

Overview

Normally, gifts to minors are subject to parental / guardian control until the age of

majority A majority, also called a simple majority or absolute majority to distinguish it from #Related terms, related terms, is more than half of the total.Dictionary definitions of ''majority'' aMerriam-Webster A Crummey trust achieves an effect desired by some creators of such trusts by offering the recipient a window of time to take immediate control of the gift (often 30 days). The control offered only applies to the current gift - typically, an amount no greater than the annual exclusion amount - not the entire trust. If the recipient fails to exercise the right to withdraw from the trust during that window, the gift becomes part of the trust and is thereafter subject to the trust's distribution conditions. However, since the recipient had the opportunity to receive the funds outside of the trust in a given tax year, the gift is deemed to be a present interest, allowing it to be subject to the annual gift exclusion. The expectation of future annual gifts under the same mechanism (or the expectation of the withholding of such future gifts if the recipient exerts control over the gift) may motivate the recipient to relinquish control of the funds into the trust. Some trusts may even explicitly state that exercise of the withdrawal provision will lead to "no further financial gifts eingmade" to the trust in future years. A Crummey trust is also referred to as a Crummey provision or a Crummey power. A Crummey provision can be contained within another type of trust. Some life insurance trusts will have a Crummey provision. A Crummey provision is typically a provision within another trust and ordinarily works as follows. The grantor makes a gift to an irrevocable living trust. The trust beneficiaries are notified by the trustee that they have the power to withdraw some or all of the gift to the trust for a specified time period. The simultaneous acts of the grantor transferring property to the trust and the trust beneficiaries being permitted to withdraw the gift from the trust is deemed to be the same as giving the gift to the beneficiaries outright. The gift to the trust with the Crummey provision now qualifies for the annual gift exclusion. The Crummey Trust is named after D. Clifford Crummey, who first came up with the concept in the 1960s. The U.S. Tax Court found this action legal in 1968, and the nickname "Crummey Power" stuck. See ''Crummey et al. v. Commissioner of Internal Revenue'', 397 F.2d 82, (

9th Cir. The United States Court of Appeals for the Ninth Circuit (in case citations, 9th Cir.) is the U.S. federal court of appeals that has appellate jurisdiction over the U.S. district courts in the following federal judicial districts: * District o ...

1968).

References

External links

''Crummey et al. v. Commissioner of Internal Revenue''
397 F.2d 82, (9th Cir. 1968), via OpenJurist. * http://www.willsandprobate.com/FAQ/crummey.htm * http://www.finaid.org/savings/crummey.phtml * http://www.fool.com/personal-finance/retirement/2006/11/14/crummey-trusts-arent-crummy{{Dead link, date=July 2020 , bot=InternetArchiveBot , fix-attempted=yes . * https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes Wills and trusts Taxation in the United States

Overview

See also

References

External links