What is a Crummey Notification?
Are you a trust beneficiary
Who recently received a “Crummy Notice?” If you did, and have never seen one before
You may not know what to do after receiving one. There must be something to do.
You understand the reason you received this notice, right? To help you better understand why
You received a notice from an Indianapolis trust attorney of Frank & Kraft
Trust
Fundamentals
To understand the
To understand the significance of a Crummey notice, you must first grasp some trust basics.
Living trusts and testamentary trusts are the two main types of trusts. Living trusts
The trusts are further divided into irrevocable and revocable living ones.
The person who creates the trust is called “Settlor”.
Maker (or Trustor). The Settlor names a Trustee, whose job is to oversee the overall operation of the Settlor.
To administer the trust using terms created by the Settlor and
Manage and invest the trust assets. The trust assets must be chosen.
The trust is set up by the Settlor. Sometimes assets may need be added to the trust
This is where a Crummey Notice comes in. Crummey notices are issued in this situation.
Is it a Crummey notice?
Named for the court case
A “Crummey Notice”, as the name suggests, is a letter that informs a person of a certain situation.
Informing the beneficiary that assets have been transferred to a trust is a good way to let them know.
The law allows the beneficiary to withdraw his/her assets. The law
This notice is required to be sent in order to ensure that trust beneficiaries are aware of the trust.
Understand their rights. Notifying beneficiaries of assets that have been inherited is not enough.
The notice informs the recipient that the assets have been added to their account and that they can withdraw them at any time.
You should also specify a deadline by which the assets are to be withdrawn.
the assets become trust property.
What
What Should I Do if I Received A Crummey Notification?
If You recently received a
You will want to know what to do if you receive a Crummey Notice. You can choose to respond to it in a number of ways.
The purpose of the trust will determine how you respond. It can be counterproductive for a
The beneficiary must act on the notification because withdrawing assets is against the law
The trust purpose. If the trust is a life insurance trust, for example, it should be clear what its purpose is.
You should ignore the notice if it is about a ILIT or trust. The ILIT is created by a trust.
An irrevocable trust, followed by the transfer of or purchase of a life insurance
The policy is one in which the Trust Settlor is insured. On the Settlor’s
Upon death, the proceeds from the life insurance policy will be paid to the beneficiary.
trust. The trust agreement will then dictate how the proceeds of the trust are used.
spent.
Premiums for the life
The trust pays the insurance policy for the period that the Settlor was alive.
Settlors can receive an additional benefit if they gift funds to the
The trusts for the payment of premiums are also tax-free. The trust for the payment of those premiums was also tax-free.
Gifts to an ILIT are not eligible for the addition of a Crummey Power
The gift must be “present” to qualify for the annual gift tax exemption.
If the “gift” is not a gift, it will not qualify for tax-free treatment. If the “gift” is not taxable
The gift is immediately accessible by the recipients, but it also creates an interest in the future.
Not a present interest. The gift is made more special by adding a “Crummy Power”.
eligible for the yearly gift tax exclusion.
Although the “Crummey power”
Give the trust beneficiaries the option to withdraw the funds they have been gifted.
Trust immediately after they have been transferred into the trust. Doing so runs
Counter to the trust purpose. These funds are intended to pay the
Premiums on a life insurance policy will pay out in the end.
After the death of the Settlor, a large sum of money is paid to the beneficiaries. For
In order for an ILIT program to work as intended, beneficiaries must simply ignore any instructions.
This logic can also be applied to
Other trusts are why it’s in your best interests to consult a trust
If you receive a Crummy Notice, you should consult an attorney to ensure you understand the best way to proceed.
to respond to the notice.
Contact
An Indianapolis Trust Attorney
For additional information, please download the FREE
estate planning worksheet. If you have any questions or concerns, please contact us.
If you have any questions about a Crummey Notice that you received, please contact an
Call
Frank and Kraft
for an Indianapolis trust attorney by calling
(317)684-1100
appointment. Paul Kraft serves as Co-Founder and Senior Principal of Frank & Kraft. This is one of Indiana’s leading law firms for estate planning, business and tax planning. Read More! Latest Posts by Paul A. Kraft Estate Planning Attorney (see all)
