It's 1968. The times, they were a-changin'. Societal norms and views were shifting, and the youth were taking to the streets to protest and challenge authority. Meanwhile, California businessman, Clifford D. Crummey was funding his family's life insurance trust using annual Christmas gifts. But when the IRS stepped in to claim those gifts didn't qualify for tax exlusion, Crummey made his own challenge to authority.
In this episode of BIF Bites, we're talking about "Crummey Powers," and how this often-overlooked estate planning tool can help families move millions of tax-free dollars through dynasty trusts.
What are Crummey Powers?
Crummey powers are a provision in irrevocable trusts that give beneficiaries or someone acting on their behalf a temporary right to withdraw newly gifted assets within a limited period (usually 30 days). This converts a future interest gift into a present interest, satisfying the IRS' requirements for the annual gift tax exclusion. Crummey powers let donors to the trust benefit from tax-free gifting up to the statutory annual limit per recipient they normally couldn't do with a standard trust. If the recipient does not exercise their right to withdraw, assets remain in the trust for their intended purpose.
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