Crummey Powers

Course: Insurance Planning
Lesson 16: The Irrevocable Life Insurance Trust

Student Question:

Must Crummey powers always be in effect to apply the annual gift tax 
exclusion in order to transfer to an irrevocable trust? Or is it the case that as long as it was 
done once, will all transfers be eligible for the annual gift tax 
exclusion?

Michael


Instructor Response:

Hi Michael,

Your first instinct is correct here.  A Crummey Power is not a “one and done” power but is rather an annual right that provides beneficiaries with the temporary right to withdrawal funds from an irrevocable trust.  The trustee must notify the beneficiaries of their Crummey right annually to claim annual exclusion treatment for trust contributions. 

Onward and Upward,

Bruce