Crummey Power
A Crummey power gives trust beneficiaries a temporary right to withdraw contributions made to the trust, converting gifts to the trust into present interests that qualify for the annual gift tax exclusion.
Exam Tip
Crummey = converts future interest to PRESENT interest for annual exclusion. Requires NOTICE and withdrawal period. Named after court case.
What is Crummey Power?
Named after the Crummey v. Commissioner case (1968), a Crummey power is a beneficiary's right to withdraw trust contributions for a limited time.
How It Works
- Donor contributes to irrevocable trust
- Beneficiary is notified of right to withdraw
- Withdrawal period (typically 30-60 days)
- If not withdrawn, gift remains in trust
- Gift qualifies for annual exclusion
Why It Matters
| Without Crummey | With Crummey |
|---|---|
| Gift to trust = future interest | Gift = present interest |
| NO annual exclusion | Qualifies for $18,000/$19,000 exclusion |
Requirements
- Written notice to beneficiaries
- Reasonable time to withdraw
- Actual ability to withdraw
Study This Term In
Related Terms
Irrevocable Life Insurance Trust (ILIT)
An ILIT is an irrevocable trust that owns life insurance policies, removing death benefit proceeds from the insured's taxable estate while providing liquidity for estate taxes.
Gift Tax
Gift tax is a federal tax on transferring assets to another person while alive, with an annual exclusion of $18,000 per recipient in 2024 ($36,000 for married couples splitting gifts). The lifetime exemption of $13.61 million is unified with the estate tax exemption.
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