Notices Should be Revised to Reflect Increase in Annual Gift Tax Exclusion

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Title:
Notices Should be Revised to Reflect Increase in Annual Gift Tax Exclusion
Date:
August 1, 2002
Publication:
From the August 2002 Riker Danzig Tax and Trusts & Estates UPDATE
Area(s) of Practice:
Estate Planning & Administration, Tax Law

If a gift made to a trust is intended to qualify for the annual gift tax exclusion, it has long been a requirement that each beneficiary of the trust receive a "Crummey" notice informing the beneficiary that he or she has the right to withdraw the annual exclusion amount from the trust. Our experience with estate and gift tax audits has shown that IRS examiners are beginning to routinely ask to see "Crummey" withdrawal notices to support the qualification of a gift to a trust for the annual gift tax exclusion. Therefore, it is important that the trustees prepare the withdrawal notices and send these notices to the trust beneficiaries. This should be done every year in which gifts are made to the trust.

In addition, now that the annual gift tax exclusion has been increased from $10,000 to $11,000 due to inflation indexing, the withdrawal notices for gifts made to trusts this year and each year going forward should refer to the beneficiary's right to withdraw $11,000 (or $22,000 in the case of transfers by spouses who are splitting gifts).