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Crummey Trusts

Crummey Trusts

The Crummey Trust (Involving Multiple Beneficiaries)

Crummey Recap

The purpose of the Crummey trust is to enable people to gift into a trust and receive the annual gift tax exclusion, while still enabling the gifts to be held in trust for the beneficiary rather than being given to them outright. The trust accomplishes this by giving the recipient a certain amount of time (at least 30 days) to take immediate control of the gift; if the recipient chooses to let this time period lapse, the gift remains in the trust. Because the recipient had the chance to take control of the gift, the gift qualifies as a present interest, and can therefore qualify as part (or all) of the donor’s annual gift tax exclusion amount. When the trust has only one beneficiary, this becomes a great way to gift into a trust without having to pay the gift tax or using up any of your $5 million lifetime exemption amount. However, if the trust has more than one beneficiary, the issue becomes more complicated.

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Crummey Trusts

The Crummey Trust (Involving One Beneficiary)

Trusts and the Gift Tax

Many people choose to make monetary gifts to their children in order to save on future estate taxes. As long as the parent gives the child no more than the annual gift tax exclusion amount ($13,000 in 2011), the gifts will be excluded from both gift and estate taxes. Normally, gifts to minors are subject to parental control until the child reaches the age of majority (18 in California), after which the child would obtain access to all the money. However, many parents feel that age eighteen is still too young an age to be able to handle such money wisely. In order to delay transfer of the funds to the child beyond the age of eighteen, the funds must be placed in a trust.

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