Crummey Power: Turning a Trust Contribution Into a Present-Interest Gift
A trust contribution is often a future interest, but a properly structured withdrawal right can create a present interest.
The problem
Trust contributions can fail annual-exclusion treatment when beneficiaries do not have a present right to use or enjoy the property.
Withdrawal right
A Crummey power gives a beneficiary a temporary right to withdraw a contribution, creating a present interest when requirements are satisfied.
Administration matters
Notice, timing, actual legal rights, and consistent administration matter because the tax result depends on a genuine withdrawal right.
Exam strategy
When a trust contribution and annual exclusion appear together, ask whether the beneficiary received a present withdrawal right.
The takeaway
A Crummey power can convert a trust contribution into a present-interest gift by giving the beneficiary a real temporary withdrawal right.
Related Summit resources
FAQ
Why are trust gifts often a problem for the annual exclusion?
They may be future interests.
What does a Crummey power provide?
A temporary withdrawal right.
Does administration matter?
Yes.