The Crummey Road.

• Jurisdiction: United States
• Author: Schuster, Randi A.
• Date: 01 May 1997

Estate tax practitioners have long been challenged with converting future interests into present interests eligible for the $10,000 per donee annual gift tax exclusion. Reliance on Crummey, 397 F2d 82 (9th Cir. 1968), provided the vehicle for qualifying transfers to a trust as a present interest. Trust beneficiaries are granted a right to withdraw all or a portion of the annual transfers to the trust, with the withdrawal right typically lapsing after a stated period of time. That window of opportunity makes the transfer a present interest.

Two issues have been troublesome:

1. Who can be counted as a beneficiary for purposes of the annual gift tax exclusion?

2. What type of notice must be given to the beneficiaries of their withdrawal rights?

Est. of Cristofani, 97 TC 74 (1991), involved an individual who created an irrevocable inter vivos trust to which she made annual contributions of the two years preceding her death. The decedent's two children were the primary beneficiaries and her five minor grandchildren were contingent remainder beneficiaries.

The trust provided...