Crummey Letter
In today’s blog post, I will be discussing about what is a Crummey letter, when you should draft a Crummey letter, where you make the letter, why you should make the letter, and who the letter is for.
What is a Crummey Letter?
A Crummey Letter is a letter that is sent to beneficiaries of an irrevocable life trust (ILIT) to inform them they can withdraw the assets provided on that trust. These beneficiaries generally have about 30 days to withdraw their benefits. If they do not withdraw, the contribution will be used to pay the policy premium.
When should you draft a Crummey Letter?
A Crummey letter should be drafted when creating the irrevocable life trust since IRS still qualifies these contributions as annual exclusion gifts. Each Crummey powerholder should be given notice of their gift to a trust.
Where do you make a Crummey letter?
Crummey Letters are made by the trustee of the trust. They have to give either written notice or email notice about the gifts to each Crummey powerholder.
Why should you make a Crummey letter?
A Crummey letter is required by the IRS to notify the Crummey powerholders of their gifts from the trust. If they do not get written notice, they will not know whether they are considered the beneficiaries who receive the gifts from the trust. If that’s the case, then the beneficiaries will not be aware to obtain their gifts and the gifts will be used to pay for the policy premiums.
Who receives the Crummey letters?
The trustee drafts the Crummey letters to the beneficiaries that he or she included to receive the gifts from their trust.