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Crummey Trusts with Crummey withdrawal rights are a popular tool often implemented at the end of a calendar year to enable parents, grandparents, aunts and uncles, and other donors to take advantage of present interest annual exclusion gifts each year.

Let's say you want to help your grandchild and, at the same time, remove assets from your estate so they won't be subject to the 40% estate tax when you die. But you don't feel comfortable just writing a check for $15,000 to your grandchild they might spend it improperly.

You would prefer to have that $15,000, and other subsequent gifts, put in a trust for them. But putting a gift in a trust for someone to receive later is a gift of a future interest, which does not qualify for the present interest annual exclusion.

However, you can set up a "Crummey Trust," put the gift in the trust, and allow the trust beneficiary to have a Crummey withdrawal power a right to withdraw or take the gift for a limited time (perhaps 30 days). This Crummey withdrawal power is what allows the gift to be classified as a gift of a present interest, qualifying for the present interest annual exclusion. If the beneficiary does not exercise their withdrawal right, then the funds stay in the trust subject to the terms of the trust instrument.

Beneficiaries, quite frankly, rarely exercise their Crummey withdrawal rights because, if they do, they are unlikely to ever see another gift from that donor or relative.

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This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 3292450