ContractsCounsel Logo

Crummey Trust

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 7,503 reviews

Jump to Section

Need help with a Crummey Trust?

Post Project Now

A Crummey Trust is a type of irrevocable trust that allows the beneficiaries to temporarily withdraw money while still utilizing the annual gift tax deduction. The trust bears Clifford Crummey's name, who prevailed in an important tax lawsuit and established the legality of this kind of trust. This article will explore key elements, benefits, and drawbacks of Crummey trust.

Essential Elements of a Crummey Trust

The following are the key elements of Crummey Trust:

  • Irrevocable Trust: Crummey trusts are irrevocable, which means that once they are established, the grantor cannot change their terms or revoke them without the approval of all beneficiaries.
  • Annual Gifting: The trust's grantor annually donates money or other assets to the trust. Usually, these contributions are made to benefit from the annual gift tax exemption.
  • Beneficiaries: The trust specifies particular beneficiaries, often members of the grantor's family, such as children or grandchildren.
  • Withdrawal Rights: The Crummey trust includes clauses allowing beneficiaries to take gifts of money out of the trust for a short time, often 30 or 60 days following the donation. Due to this withdrawal power, the donations now qualify as present interest gifts rather than future interest gifts.
  • Annual Gift Tax Exclusion: Each gift qualifies as a present interest gift for the annual gift tax exclusion since it grants beneficiaries withdrawal rights. This enables the grantor to take advantage of the yearly gift tax exclusion, which exempts the gift from gift taxes up to a predetermined amount (the IRS-set exclusion limit). This amount is $16,000 per recipient for the 2022 calendar year, increasing to $17,000 in 2023.
  • Limited Withdrawal Period: The withdrawal right is often only valid for a brief period of time, after which the terms and conditions of the trust apply to the gifted monies.
  • Benefits with Regard to Estate and Gift Taxes: By utilizing the annual gift tax exclusion, the Crummey Trust enables the grantor to make tax-free gifts to each beneficiary up to the exclusion amount. This can lessen prospective estate tax payments and diminish the grantor's taxable estate.
  • Control and Asset Protection: The Crummey Trust provides some asset protection by insulating the trust's assets from possible creditors and other dangers. The grantor controls wealth transfer and financial support by dictating how the trust's assets are transferred to beneficiaries.
  • Grantor Retained Interest (Optional): Although the main goal of a Crummey trust is to benefit future generations, the grantor may elect to keep a small amount of ownership in the trust, such as a lifetime income stream.

Benefits of a Crummey Trust

The following are the benefits of Crummey trust:

  • Using the Annual Gift Tax Exclusion: A Crummey trust's capacity to use the annual gift tax exclusion is one of its main advantages.
  • Preserving Generational Wealth: The grantor can protect their wealth and ensure it is smoothly transferred to subsequent generations by making annual gifts to the trust. As it helps reduce inheritance tax burdens and preserves the estate's value for recipients, this technique can be especially helpful for people with sizable estates.
  • Safeguarding Assets: When assets are placed in a Crummey trust, they are protected from pending lawsuits, potential creditors, and other dangers. The wealth set aside for beneficiaries can be safeguarded and shielded from outside demands thanks to this additional degree of security.
  • Exercising Control Over Wealth Transfer: The Crummey Trust gives the grantor complete control over how and when trust assets are disbursed to beneficiaries. This degree of control ensures that assets are allocated to satisfy the needs of both the grantor and the beneficiaries.
  • Educating Beneficiaries on Financial Responsibility: Beneficiaries' right to withdraw under the Crummey trust may serve as a teaching tool on the importance of fiscal responsibility. It teaches recipients about responsible money management and wise financial decisions.
  • Freezing Estate and Saving on Gift Tax: By giving to the trust on a yearly basis, the grantor can "freeze" the value of the assets, preventing any future appreciation from giving rise to estate taxes. Additionally, the grantor can transfer assets tax-effectively without using up their lifetime gift and estate tax exemptions by utilizing the gift tax exclusion.
  • Protecting Against Future Tax Law Changes: Using a Crummey trust to take advantage of the annual gift tax exclusion can be a clever approach to hedge against future changes in tax regulations. The grantor can guarantee tax benefits for their beneficiaries even if tax regulations change in the future by making gifts while there are favorable tax conditions.
  • Providing Estate Planning Flexibility: Crummey Trusts give estate planners freedom in their decisions. The grantor can modify the trust to meet their unique objectives and create distinct trusts for various beneficiaries, adjusting the asset distribution to meet the needs of each person.
Meet some lawyers on our platform

Nicholas M.

7 projects on CC
View Profile

Owen K.

7 projects on CC
View Profile

Zachary J.

182 projects on CC
View Profile

Sara S.

40 projects on CC
View Profile

Drawbacks of a Crummey Trust

The following are the drawbacks of a Crummey trust:

  • Loss of Control: When assets are given to a Crummey trust, the grantor loses ownership. The trust becomes unchangeable, and without the beneficiaries' approval, the grantor cannot alter its provisions or gain access to its assets.
  • Complexity and Administrative Burden: Setting up and maintaining a Crummey trust can be difficult and time-consuming. The grantor must adhere to IRS guidelines, including keeping proper records of trust activity and delivering Crummey letters to beneficiaries each time a contribution is made.
  • Beneficiary Relationship Considerations: Grantors must consider the potential effects on family dynamics when establishing a Crummey trust. Although beneficiaries rarely exercise their withdrawal rights, some might consider the yearly donation an expectation, which could cause tension or misunderstandings.
  • Tax Consequences for Beneficiaries: Beneficiaries will get the gifted funds directly if they want to exercise their withdrawal rights, resulting in no tax consequences. Depending on their financial status and tax preparation strategies, this can result in taxable income for the beneficiaries.
  • Limitation on Gifted Funds: The Crummey trust is primarily made for modest annual gifts to benefit from the tax exemption. Other estate planning techniques might suit people looking to transfer large sums.
  • Ineffectiveness for People with Large Estates: The annual gift tax exclusion might not substantially lower the estate tax burden for people with sizable estates. More thorough estate planning strategies may be required to handle intricate tax difficulties in these situations.
  • Compliance with Crummey Letters: Failure to properly inform beneficiaries of their withdrawal rights through Crummey letters or other procedural errors may prevent the trust from meeting the requirements for the gift tax exclusion.

Key Terms for Crummey Trusts

  • Beneficiaries: The people eligible to receive payments from the Crummey Trust.
  • Asset Protection: A component of the Crummey trust that guards trust assets from prospective creditors and legal actions.
  • Present Interest: The capacity of beneficiaries to instantly or within a limited timeframe access and withdraw funds from the Crummey trust.
  • Gift Tax Exclusion: Amount of gifts that can be given annually to each recipient without being subject to gift taxes.
  • Crummey Letters: Written communications from the grantor advising each Crummey trust beneficiary of their withdrawal right.

Final Thoughts on Crummey Trusts

Crummey trusts combine the advantages of the annual gift tax deduction with beneficiary withdrawal rights, making them a potent and useful estate planning instrument. The grantor can use the annual gift tax exclusion to reduce possible estate tax penalties and preserve generational wealth by making annual gifts to the Crummey Trust. The Crummey Trust also has certain disadvantages, such as losing control over the trust's assets, logistical challenges, and the requirement for IRS compliance. Despite its drawbacks, the Crummey Trust is still a great choice for those who want to leave a lasting financial legacy for future generations while retaining financial stability and asset control.

If you want free pricing proposals from vetted lawyers that are 60% less than typical law firms, click here to get started. By comparing multiple proposals for free, you can save the time and stress of finding a quality lawyer for your business needs.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Crummey Trust Lawyers

Richard G. on ContractsCounsel
View Richard
5.0 (1)
Member Since:
June 20, 2022

Richard G.

Free Consultation
Greensboro, NC
3 Yrs Experience
Licensed in NC
University of Elon School of Law

Hello! I am an Iowa native trying to bring some Midwest problem-solving to southern civil law. I thoroughly enjoy getting to know the individuals and businesses I assist. I practice estate planning and business formation and, with my litigation experience in mind, I help clients plan to ensure they and their interests are protected in the future.

Danielle G. on ContractsCounsel
View Danielle
5.0 (2)
Member Since:
July 12, 2022

Danielle G.

Attorney and Founder at Danielle D. Giovannone Law Office
Free Consultation
Schenectady, NY
16 Yrs Experience
Licensed in NY
Fordham University School of Law

Danielle Giovannone is the principal of Danielle D. Giovannone Law Office. In her experience, Danielle has found that many business do not require in-house legal counsel, but still need outside counsel that knows their business just as well as in-house counsel. This need inspired Danielle to start her firm. Before starting her firm, Danielle served as Contracts Counsel at Siena College and as an attorney at the New York City Department of Education, Office of the General Counsel. At the NYCDOE, she served as lead counsel negotiating and drafting large-scale commercial agreements, including contracts with major technology firms on behalf of the school district. Prior to the NYCDOE, Danielle worked as an associate at a small corporate and securities law firm, where she gained hands-on experience right out of law school. Danielle has provided legal and policy advice on intellectual property and data privacy matters, as well as corporate law, formation and compliance, employer liability, insurance, regulatory matters, general municipal matters and non-profit issues. Danielle holds a J.D. from Fordham University School of Law and a B.S. from Cornell University. She is active in her Capital District community providing pro bono services to the Legal Project, and has served as Co-Chair to the Niskayuna Co-op Nursery School and Vice President of Services to the Craig Elementary School Parent Teacher Organization. Danielle is a member of the New York State Bar Association.

Michael J. on ContractsCounsel
View Michael
5.0 (1)
Member Since:
July 14, 2022

Michael J.

Free Consultation
Warren, New Jersey
15 Yrs Experience
Licensed in NJ, NY
New York Law School

Combining extensive experience in litigation and as general counsel for a real estate and private equity company, I provide ongoing guidance and support to clients on a variety of transactional matters, including business formation, partnership agreements, corporate agreements, commercial and residential leasing, and employment issues.

Anand A. on ContractsCounsel
View Anand
5.0 (29)
Member Since:
July 17, 2022

Anand A.

Free Consultation
Philadelphia, PA
9 Yrs Experience
Licensed in NJ, PA
Rutgers University School of Law

Anand is an entrepreneur and attorney with a wide-ranging background. In his legal capacity, Anand has represented parties in (i) commercial finance, (ii) corporate, and (iii) real estate matters throughout the country, including New Jersey, Pennsylvania, Delaware, Arizona, and Georgia. He is well-versed in business formation and management, reviewing and negotiating contracts, advising clients on financing strategy, and various other arenas in which individuals and businesses commonly find themselves. As an entrepreneur, Anand is involved in the hospitality industry and commercial real estate. His approach to the legal practice is to treat clients fairly and provide the highest quality representation possible. Anand received his law degree from Rutgers University School of Law in 2013 and his Bachelor of Business Administration from Pace University, Lubin School of Business in 2007.

Christopher M. on ContractsCounsel
View Christopher
4.9 (8)
Member Since:
August 16, 2022
AHAJI A. on ContractsCounsel
Member Since:
July 8, 2022


Free Consultation
Houston, TX
24 Yrs Experience
Licensed in NC, TX
Indiana University - IUPUI

Ahaji Amos, PLLC is a Houston-based intellectual property and civil litigation firm servicing clients throughout the U.S.

Marc S. on ContractsCounsel
View Marc
Member Since:
July 29, 2022

Marc S.

Free Consultation
Henderson, Nevada
42 Yrs Experience
Licensed in NV
Southwestern University

Have been practicing real property and business law in Nevada for over 40 years. No longer handling any litigation, transactional matters only.

Find the best lawyer for your project

Browse Lawyers Now
Crummey Trust lawyers by city
See All Crummey Trust Lawyers
related contracts
See More Contracts
other helpful articles

How It Works

Post Your Project

Get Free Bids to Compare

Hire Your Lawyer


Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call

Find lawyers and attorneys by city