Crummey Powers

These are rights (powers) given to beneficiares (persons who benefit from) a trust so that gifts of money or property to the trust will qualify for the gift tax annual exclusion (presently in 2006 $12,000/year/donee). This mechanism is used in many irrevocable (cannot be changed) trusts, such as children's trusts and insurnace trusts. It raises a host of complex tax issues. To implement a Crummey power (also called annual demand power) the trustee should give written notice to the beneficiaries of the gifts made to the trust and their right to withdraw some portion or all of those funds. The beneficiaries should sign acknowledging receipt of the notice and the trustee should save these signed notices in the permanent records of the trust.