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Anne
Anne, Master Tax Preparer
Category: Tax
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Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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What is the annual gift tax on Crummey trusts?

Customer Question

What is the annual gift tax exclusion amount on gifts to Crummey trusts?

Submitted: 6 years ago.
Category: Tax
Expert:  Merlo replied 6 years ago.

The current annual exclusion amount on gifts made to a Crummey Trust is $13,000. That is the allowed exclusion amount for 2009.

This amount generally increases each year, but for 2009, $13,000 is the allowed limit on gifts.

If this was helpful, please press the Accept button. Positive feedback is also appreciated.

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Merlo and 4 other Tax Specialists are ready to help you
Customer: replied 6 years ago.
I know what the annual gift tax exclusion is. But I'm looking for the special rules surrounding gifts to trusts with Crummey powers (trusts often used for the purchase of life insurance policies for taxpayers children.)
Expert:  Anne replied 6 years ago.

Since the annual exclusion for the Crummey letter follows the IRS regs. as "future gifts", the limit would be $13000 as Merlo stated. Please see below:

Morrow Law - Crummey LettersP O

The copy of the letter referenced above mentioned a $10,000 exclusion, but that particular letter was drafted when the yearly exclusion amount was $10,000 (1998-2001)

I hope this offers clarification

Customer: replied 6 years ago.

Perhaps I am asking the wrong question. It's my understanding there is an additional constraint - a "5 by 5" power? Can you advise how that interacts with the gifting regulations? If this is, indeed, a separate question, from my original I am happy to pay for an additional question. And I thank you in advance for your assistance.

Expert:  Anne replied 6 years ago.

The "5x5" rule deals with the lapse of a Crummey withdrawal right that involves an amount >$5000 or 5% of the trust assets when the release or general power of appointment is treated as a transfer by the individual who released the power.

Please see page 10

Your original question re: The Crummey gift tax exclusion is still the same as any individual's, ($13000/person)

Please see page 8

I hope this helps clarify things.

Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 2316
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
Anne and 4 other Tax Specialists are ready to help you
Customer: replied 6 years ago.

I am very grateful for your response. The information you provided has been most helpful.

Expert:  Anne replied 6 years ago.
You're most welcome. Thank you for the opportunity to work with you. Please let me know if I can help you in the future.

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