“Crummey” power

“Crummey” power

by Richard C. Wilson & Family Offices Group Association Team

Family Office Definition: “Crummey” power

“Crummey” power definition: Terms of a trust that allow beneficiaries to withdraw contributions to the trust for a limited period of time.  Gifts made to a trust are normally taxed because they are for future (not immediate) benefit of beneficiaries. With Crummey power, the grantor is able to make contributions to the trust gift-tax free (as long as the amount is less than the annual gift tax exclusion per each beneficiary).  It does not matter if the beneficiaries actually take withdrawals or not to be exempt from gift taxes, as long as they are properly notified of their right to withdrawal.  Contributions made to the trust with Crummey power are also excluded from the taxable estate, since beneficiaries had a right to withdraw contributions and even if they chose not to take withdrawals.

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