Important Trust Reminder: Send Your “Crummey” Notices

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Important Trust Reminder: Send Your “Crummey” Notices
November 21, 2007
Area(s) of Practice:
Estate Planning & Administration, Tax Law

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 a pro rata share of contributions to the trust, up to the amount of the gift tax annual exclusion (currently $12,000 per donee, or $24,000 in the aggregate for a married couple). 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. This notice (known as a “Crummey notice”) should be given by the trustee to the beneficiaries (or in the case of minor beneficiaries, to their natural or 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 wish to remind you again that each year any additional contributions are made to the trust (and your direct 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 the trust during 2007, you need to send, or remind your trustee to send, a Crummey notice to each of the beneficiaries of the 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.