Although the name sounds like a description for a poorly drafted trust, a Crummey trust is actually an estate planning tool that allows the settlor to utilize the annual gift tax exclusion when gifting into the trust. The trust beneficiary must have notice of the gift into the trust and retain the right to withdraw the gift from the trust. However, this right can expire after a reasonable length of time, usually 30 or 60 days.
The Crummey trust allows the buildup of a large trust fund over a number of years if the beneficiary does not withdraw the annual gifts into the trust. Another good use of the Crummey trust occurs when the trustee purchases life insurance on the life of the settlor and pays the premiums with the annual gift into the trust. This creates the potential that a large trust fund will be created when the insurance is paid to the trust on the settlor’s death. Because the Crummey Trust is irrevocable, the trust is not considered part of the settlor’s estate and thus is not subject to the Federal estate tax.
To learn more about the Crummey Trust and other estate planning techniqes that can be implemented to preserve your wealth, please contact our estate planning attorneys at 954-944-2855 or via email at firstname.lastname@example.org.