Despite its name, a Crummey Gift Trust isn’t crummy at all – it can be pretty great if you need to protect financial gifts from taxes. A Crummey Trust allows you to gift money through a trust but still have the gift tax exclusion. Crummey Trusts are often used by parents to give their children lifetime gifts and shelter their money from gift taxes. The annual gift tax exclusion usually doesn’t apply to gifts made to trusts. The financial gift in a Crummey Trust must be equal to or less than the permitted annual exclusion amount.
A Crummey power allows the grantor to make a financial gift to an irrevocable trust and avoid a gift tax.
1. Avoid Gift Taxes
A Crummey power lets someone receive a financial gift that is not eligible for a gift-tax exclusion and turn it into a gift that is eligible. The gift cannot exceed $16,00 annually, per beneficiary, and is typically used for Irrevocable Life Insurance Trusts and in Gift Trusts.
2. Tax Free
Money transferred into a Crummey Trust is tax free and does not count against the grantor – or a married couple’s – lifetime estate tax exemption.
3. Children and Grandchildren
A Crummey Trust is a good option to provide tax free funds for children and grandchildren. Grandchildren are not typically included under an Irrevocable Life Insurance Trust.
Creating a Crummey Trust or ILIT is an important estate planning strategy to save your heirs time and money. If you have a sizable life insurance policy, protect its value by speaking with an Illinois irrevocable life insurance trust lawyer today at 630-864-5835.
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