Crummey Notice Reminder

Crummey Notice Reminder
Tax and Trusts & Estates UPDATE

We want to remind you again that many of you have a trust or trusts that contain what are commonly known as "Crummey powers." Virtually all irrevocable life insurance trusts contain Crummey powers. Generally, a Crummey power is a right granted to the beneficiaries of the trust to withdraw from the trust up to the amount of your gift tax annual exclusion (currently $12,000 per donee, or $24,000 in the aggregate for a married couple).1 This withdrawal right allows gifts to your trust to qualify for the gift tax annual exclusion, but only if the beneficiaries are aware of their rights. Thus, notice (known as a "Crummey notice") should be given by the trustee to the beneficiaries (or in the case of a minor beneficiary, to their legal guardian). If we prepared a trust for you that contained a Crummey power, we would have provided you with a form of Crummey notice after your trust was executed. We wanted to remind you again that each year any additional contributions are made to the trust (and the payment of premiums on life insurance owned by the trust constitutes a "contribution"), these notices should be given. The notice should be delivered at the same time or shortly after a contribution is made to the trust, but in no event later than the end of the year in which the contribution is made.

If you have a trust or trusts with Crummey powers and you have made contributions to or on behalf of your trust during 2008 and not already done so, please send, or remind your trustee to send, a Crummey notice to each of the beneficiaries of your trust before the end of the year. If you have any questions about these Crummey notices and the procedure to be followed, please feel free to contact your Riker Danzig attorneys or other advisors.

1 As elsewhere noted in this UPDATE, these amounts will be increasing next year to $13,000 and $26,000, respectively.