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In order to minimize estate taxes, your loved one may have decided to create what’s known as a Crummey trust. This type of trust is often used to hold insurance policies. The creator of the trust is able to make annual, tax-free gifts to the trust in order to pay the premium on the policy. If all of the proper rules are followed, the value of the death benefit of the policy will not be included in the creator’s estate after he or she dies. Your loved one may ask you to serve as trustee of a Crummey Trust. It is important to ask certain questions before proceeding.

8 Questions to Ask Before Agreeing to Serve as Trustee of a Crummey Trust

In order for a Crummey trust to work effectively, the trustee must follow the requirements carefully and exercise caution during administration. Before proceeding, we encourage you to ask questions about the following:

  1. The names and contact information of the beneficiaries of the trust. This is crucial because as trustee of a Crummey trust, you will be required to provide beneficiaries with notice whenever a gift to the trust is made. This is known as a Crummey notice.
  2. How the proceeds of the life insurance policy are expected to be used.
  3. The insured’s expectations as to how the policy and other trust assets should be managed.
  4. The general intentions of the grantor of the trust with regard to the purpose of the trust and the distribution of its assets.
  5. The amount of the policy’s death benefit.
  6. The premium amounts for the policy.
  7. The terms of the policy, including whether the policy is a term, universal, or whole life policy.
  8. The names of the grantor’s preferred tax and financial advisors.

The good news for trustees is that they can seek guidance from a knowledgeable professional to learn what’s required for a trust administration. To get started, contact us today at (714) 459-5481.

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