Don’t let your Crummey trust crumble
Abstract: The annual gift tax exclusion lets you remove a substantial amount of wealth from your taxable estate without tapping any of your $1 million lifetime gift tax or $3.5 million estate tax exemptions. There’s just one catch: The annual exclusion applies only to gifts of a present interest — that is, the recipient must have all immediate rights to the use, possession and enjoyment of the gifted property or of the income from such property. But gifts to a trust are, by definition, gifts of future interests. So how do you make annual exclusion gifts to a trust? One way is to provide trust beneficiaries with Crummey withdrawal rights. This article discusses such trusts, including the “5&5 rule,” while a sidebar offers dos and don’ts in regard to protecting a Crummey trust from IRS challenge.