Gifting Strategies

Crummey Trust

A Crummey trust contains provisions that permit beneficiaries of the trust to withdraw transfers made to the trust typically up to the $12,000 annual gift tax exclusion amount.  The ability to withdraw the transfers is generally for a limited period of time (e.g., for 30 days).   If the transfers are not withdrawn, they are generally added to trust principal and the beneficiaries are no longer able to demand the distribution of the contributions from the trustee.  The ability of the trust beneficiaries to withdraw the transfers from the trust allows all or a portion of the transfers to qualify for the $12,000 annual gift tax exclusion.  

The name “Crummey” comes from the original court case that ruled that the inclusion of the withdrawal power in the trust instrument allowed the transfers to the trust to be considered a transfer of a present interest in property, a requirement in order to have a transfer qualify for the annual gift tax exclusion.

A Crummey trust has no requirements regarding the distribution of income or principal, and may last for a fixed term or for the life or lives of the trust beneficiaries.  The trustee of a Crummey Trust is generally given broad discretion over distributions of trust income and principal.   This trust may be used to benefit a number of generations of your heirs (e.g., grandchildren, and great-grandchildren).