Orange County California

Trust Attorneys


Creating an estate plan involves careful consideration of many different goals and needs. For those who have an estate large enough that it will be subject to federal estate taxation after they die, it is often wise to consider using one or more tax savings techniques. One such tool that can be incorporated into an estate plan is known as a Crummey Trust.

6 Facts About Crummey Trusts

What is a Crummey trust? The following are six facts:

  1. Crummey trusts are often used in order to save on estate taxes. If you do not make gifts that exceed more than the annual gift tax exemption amount, the gifts will be excluded from your estate for tax purposes.
  2. These trusts can be used to prevent the beneficiary from receiving the gift but still maintain the tax benefits by removing the value of the gift from your estate. For example, if your beneficiary is young, you may not want him or her to have access to the gift amount for another five or ten years. This can be accomplished by using a Crummey trust.
  3. Gifts made to the Crummey trust are managed by the trustee. Often, the gifts are used to pay the premiums on an insurance policy if the trust owns such a policy.
  4. To take advantage of the tax benefits of a Crummey trust, the beneficiaries must be given a temporary right to withdraw each gift after it is made. This right to withdraw usually lasts for 30 days. Once the time period has passed, the withdrawal right lapses, and the gift is treated as tax free.
  5. When the beneficiaries reach the age designated by the trustee to receive distributions, the assets of the trust are given to them.
  6. While it is preferable for the beneficiaries not to exercise their withdrawal rights, even if a beneficiary does so, the right to withdraw is limited to the amount of the gift that was made. The other assets of the trust, including gifts made in previous years, cannot be withdrawn.

Are you interested in learning more about creating your estate plan? We encourage you to contact us today at (714) 282-7488.

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